Score one for Lee Enterprises in the media company’s battle against hedge fund Alden Global Capital’s hostile takeover attempt. On Monday, the Delaware Chancery Court upheld a decision made by Lee Enterprises’ board of directors to reject Alden’s director nominations. The court said that Lee’s board “acted reasonably in enforcing a validly adopted bylaw with a legitimate corporate purpose.”
“On the question of the plaintiff’s compliance with the bylaws, I find that the nomination notice failed to satisfy both the record holder and form requirements. Lee’s rejection of the notice was therefore contractually proper,” wrote Vice Chancellor Lori Will in her memorandum opinion.
Lee’s original rejection of director nominations
“Instead of following the straightforward process outlined in Lee’s bylaws to provide proof that Alden is an eligible shareholder, Alden attempted to circumvent by having an unrelated, third-party shareholder send a cover letter attaching an incomplete and internally inconsistent nomination from Alden. In addition, Alden’s nomination notice does not comply with several other substantiative requirements of Lee’s bylaws,” said Lee’s board in December after rejecting Alden’s director nominations.
Alden subsequently took Lee to court, alleging that Lee never took their unsolicited cash offer of $141 million seriously and that Lee was trying to protect three of their directors by rejecting Alden’s nominations. The court has ruled on the director nominations for the 2022 annual shareholder meeting, and those nominations will be disregarded, as will any proxies or votes in favor of Alden’s candidates, at Lee’s annual shareholder meeting on March 10. Lee shareholders can go to Lee’s investor portal to view proxy materials and additional information about the upcoming meeting.
Board pleased with victory
Lee’s board of directors reacted to their legal victory in a February 15, 2022 news release.
“We are pleased that the Delaware Court of Chancery has affirmed the importance of orderly annual shareholder meetings and confirmed the decision by the Lee Board of Directors to reject as invalid the notice of nominations delivered by Alden. Based on the ruling of the Vice Chancellor, Lee will not recognize Alden’s nominations, and any proxies submitted, or votes cast, for the election of Alden’s director candidates will be disregarded,” said Lee’s board of directors.
“We urge shareholders to vote FOR all three of Lee’s proposed nominees – Mary E. Junck, Herbert W. Moloney and Kevin D. Mowbray – at our Annual Meeting to support the continued execution of Lee’s digital growth strategy,” the board added.
Though Alden can not nominate directors at this annual shareholder meeting, if they qualify as an eligible shareholder and follow nomination procedure and information requirements as noted in Lee’s bylaws, Alden could potentially nominate directors at the 2023 shareholder meeting.
Will this be the end of Alden’s hostile takeover attempt? It’s not likely. In January, Lee Enterprises called the company a “vulture hedge fund,” and they aren’t the only ones who feel that way. Alden has a reputation of buying media companies, slashing costs and cutting staff with little concern for the need for quality, local journalism. They fight until the bitter end. In fact, that’s how they eventually acquired Tribune Publishing last year. Alden may not ultimately be successful, but we don’t think they are giving up any time soon.