December 9, 2021

Continuing its resistance to a hedge fund takeover, Lee Enterprises’ board formally rejected Thursday a $24 per share cash offer by Alden Global Capital.

That announcement was paired with a generally good earnings report for the quarter that ended Sept. 30.

CEO Kevin Mowbray said in a conference call with analysts that Lee has built paid digital-only circulation at its 77 daily newspapers to 425,000. That is well on its way to a goal of 900,000 in five years.

In a press release announcing Lee would not accept Alden’s offer, board chairman Mary Junck said, “The Alden proposal grossly undervalues Lee and fails to recognize the strength of our business today, as the fastest-growing digital subscription platform in local media, and our compelling future prospects. We remain confident in our ability to create significant value as an independent company.”

Taking a jab at Alden’s record of ruthlessly cutting its newsrooms, Junck’s statement also said, “the core of Lee’s strength and competitive advantage is steadfast commitment to high-quality local news.”

Lee had earlier instituted a so-called “poison pill” takeover defense, which aims to block Alden over the next year from acquiring more than 10% of the company’s stock on the open market. (Its current stake is just over 6%.)

Then last Friday it rebuffed Alden’s attempt to nominate three candidates for Lee’s eight-person board, saying the nominations did not comply with the company’s bylaws.

A request for comment to Alden’s representatives was not immediately answered. The fund could make a variety of countermoves in the coming days, including legal action or upping its offer.

Lee’s holdings include The St. Louis Post-Dispatch and Arizona Daily Star of Tucson. When it acquired Warren Buffett’s BH Media, roughly its own size, early this year, it added several more large papers including The Buffalo News, Richmond Times-Dispatch and Omaha World-Herald.

Alden completed a hostile takeover of Tribune Publishing this summer, picking up the Chicago Tribune and other metros.

In its financial report, Lee emphasized an ongoing shift to digital and subscription revenue as print advertising (traditionally one of its strengths) continues to wane.

With growth from the BH Media acquisition and several related businesses, Lee showed a modest 1.1% year-to-year improvement of revenues to $94 million and turned a profit of $4.8 million.

The profit would have been higher but for $10.6 million in interest expense and efforts to pay down debt, which stood at $483 million at the end of the quarter.

Asked about headcount, Mowbray said that it was down from the period a year ago but did not specify by how much or volunteer the share of the job reductions coming from Lee’s newsrooms.

Lee’s stock has been trading for several weeks at more than the $24 a share Alden offered Nov. 22, suggesting that Wall Street expects a higher offer or agrees that the company can grow if it stays independent.

After the pair of announcements, Lee shares were up another 11.8% in late morning trading to $27.90.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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