UPDATE — This article was updated February 28, 2022 to clarify that Alden Global Capital lost a request for an injunction to delay Lee Enterprises’s annual meeting set for March 10, 2022.
On Friday, hedge fund Alden Global Capital lost a request for an injunction to delay newspaper publisher Lee Enterprises‘s annual meeting scheduled for March 10, reports the Des Moines Register. In the second lawsuit, Alden sued Lee because the company allegedly breached its own bylaws which require a majority voting standard, not the plurality standard that Lee plans to use in the upcoming annual meeting. The Delaware Court of Chancery ruled in Lee’s favor, denying all of Alden’s latest motions, including the request to delay the annual shareholders’ meeting.
According to Alden, by using the plurality standard, Lee is “guaranteeing” the reelection of two of Lee’s directors, including the chairman of the board. Under Lee’s plan, a director who gets at least one vote and is running unopposed would be reelected to the board. Alden wanted to impose the majority standard which requires directors to win the majority of votes cast to keep their board seats.
Alden currently owns 6.3% of Lee’s stock and is fighting for control of the board in a hostile takeover attempt. Alden wants to oust Mary Junck and Herbert Moloney from their board seats. Their seats are up for election every three years, so this year was critical for Alden to replace them on the board.
“Lee’s nominees are clearly the only candidates up for election, but the Lee Board is falsely claiming that this year’s election is ‘contested’ in order to use an improper ‘plurality’ voting standard — ensuring re-election for nominees who receive even as little as a single vote in their favor. Alden remains committed to ensuring Lee’s shareholders have the opportunity they deserve to decide if board members should be protected at all cost or forced out for doing a bad job,” said Alden in a February 22 news release.
“With this latest brazen act, Lee’s self-interested Board continues to prioritize themselves over shareholders who have the right to elect directors. Alden’s lawsuit is aimed at ensuring that it is Lee’s shareholders who elect Lee’s directors, not Lee’s Board,” Alden added.
Lee’s reaction to filing of second lawsuit
Following the filing of the second lawsuit, Lee made the following comments:
“We are disappointed, but not surprised, that Alden continues to pursue increasingly desperate measures in an attempt to destabilize Lee and advance its grossly undervalued hostile proposal to purchase the Company. We are applying the clear and plain language of our bylaws, which is not new, and our position that plurality voting applies at this meeting (because of Alden’s actions) has been abundantly clear in our disclosures for over a month now. Alden asked us last week to amend our bylaws to change the clear meaning of them in the middle of an election. The Board properly determined not to do so,” Lee said in a February 22 statement.
Lee also urged shareholders to vote FOR ALL board nominees on their white proxy cards after last week’s lawsuit filing.
In a February 25 news release, Lee Enterprises confirmed that the Delaware Court has denied all motions brought against Lee by Alden Global Capital which were an attempt to delay the March 10 annual shareholder meeting.
“This is now the second court ruling in less than two weeks rejecting Alden’s desperate efforts to destabilize Lee and push its grossly undervalued proposal to purchase the Company. Lee applauds the Court’s latest decision and looks forward to holding its 2022 Annual Meeting on March 10, 2022, as planned,” said Lee.
Earlier court ruling
In its comments Friday, Lee referred to an earlier lawsuit filed by Alden in December. Earlier this month, the Delaware Chancery Court upheld a decision made by Lee’s 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.”
In our last article about the Alden vs. Lee saga published on February 17, we predicted that Alden wouldn’t give up its attempts to take over Lee Enterprises. The “vulture hedge fund,” as Lee referred to Alden, has been in similar situations before, and the company has fought until the bitter end. In fact, that’s how they acquired Tribune Publishing last year.
In this case, the Delaware Chancery Court has closed two legal doors where Alden hoped to gain influence over Lee’s board. This will make a continued fight more difficult for Alden, but they love a challenge. It is hard to predict if Alden will cease and desist, or if they will work a hostile takeover from another angle. If their history is any indication, they aren’t giving up just yet.