March 10, 2022

As expected, Lee Enterprises had its slate of three directors approved for three-year terms Thursday at its annual meeting. That closes at least a chapter in hedge fund Alden Global Capital’s hostile bid to take over the company.

Alden had offered an unsolicited bid in late November at $24 a share. Lee quickly said no, arguing that the bid undervalued the company, which it claims is in the midst of a successful digital transition. Soon after, Lee stock quickly rose to the mid $30s.

Then an Alden affiliate filed two unsuccessful lawsuits asking that its two nominees be put on the ballot or that the rules Lee had set for the election be changed. Next it urged shareholders to vote no or withhold votes on two veteran directors, former CEO Mary Junck and Herbert Moloney.

In fact, the pair received more than 70% of the votes cast in a preliminary count, Lee said in a press release. And 75% of shareholders voted by returning their proxy cards, a turnout of 20% more than the average at its last three annual meetings.

An Alden representative did not immediately return an email seeking comment.

So what could Alden do next?

  • Nearly 30% of those voting withheld approval. Alden could argue that the result shows substantial support for its criticism of Lee management, arguing that its executives and board are entrenched and self-serving. It could keep up a negative campaign and try again to get seats on the eight-member Lee board a year from now.
  • Alden and its affiliates currently control just over 6% of Lee’s stock. They could buy more. But if they reach 10%, a so-called shareholders rights plan, more commonly known as a poison pill, kicks in. Oversimplifying slightly, the plan, passed days after the takeover bid, would offer existing shareholders more stock, thus drastically diluting the value for Alden.
  • Alden could up its bid. Lee stock traded at $18 a share before Alden’s $24 offer. It has fallen some since its peak but was still at $30.66 midday Thursday. Alden typically aims to buy low, so it may not want to come up with a premium of 50% or more above its first bid.
  • The hedge fund could acknowledge defeat and walk away. A multi-year campaign to gain influence at Tribune Publishing and buy the company succeeded with a sale last summer. Some other Alden takeover campaigns, however, like a bid for Gannett in 2019, have failed.

The result means that Lee’s 77 daily newspapers can operate as they have been, probably for at least a year. While Lee runs a tight operation, Alden’s track record has been to slash expenses, in part by deep cuts to newsrooms, in papers and the digital sites it controls.

The NewsGuild has sided with Lee in the fight, filing a legal brief supporting the reelection of the company’s preferred directors.

Lee’s largest properties include the St. Louis Post-Dispatch, Arizona Daily Star in Tucson, The Buffalo News, Omaha World-Herald and Richmond Times-Dispatch. The latter three became part of Lee when it roughly doubled in size in March 2020 by acquiring Warren Buffett’s BH Media.

In Lee’s press release, announcing the result, CEO Kevin Mowbray said, “We deeply appreciate the record turnout and strong support we received from shareholders at this pivotal annual meeting. The results represent a resounding rejection of Alden Global Capital’s campaign against Lee. We look forward to continuing to grow the business and building value as we execute our digital growth strategy. We also remain committed to delivering highly valued local journalism, which is at the core of Lee’s strengths and competitive advantage.”

In some takeover fights, other bidders enter the action once a company is put “in play.” However, it is not clear that another media company or fund would be looking to increase its holdings in the financially challenged newspaper industry.

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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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