In an urgent plea to Lee Enterprises shareholders, the 132-year-old media organization pleaded with fellow shareholders to help them stop ‘vulture hedge fund’ Alden Global Capital from a hostile takeover. Along with the letter to shareholders, Lee Enterprises, who publishes 90 daily newspapers in markets across the U.S., included a packet of “critically important materials” they wanted shareholders to review prior to the 2022 annual shareholder meeting on March 20, 2022. Lee urged shareholders to vote via the white proxy card prior to the meeting.
“A ‘Vulture Hedge Fund’ is seeking to acquire Lee at a steep discount. Don’t let it take value that belongs to you. Vote the WHITE proxy card today,” said the letter in bright blue text. “To ensure Lee’s shareholders receive the full benefit of Lee’s opportunities and business plan, we URGE you to vote “FOR” ALL the Board’s proposed nominees by using the WHITE proxy card.”
The saga
The saga started in November when Alden made an unsolicited cash offer to buy Lee for $24 a share, representing a 30% premium over Lee’s closing price of $18.49 per share on November 19, 2021. This offer valued Lee at $141 million. Alden owns approximately 200 publications operating under their MediaNews Group subsidiary. At the time of the original offer, Alden owned 6% of Lee Enterprise stock.
A few weeks later, Alden nominated three candidates to Lee Enterprises’ board of directors. However, Lee rejected those board candidates, saying Alden violated the company’s bylaws by failing to meet several essential requirements. Alden fired back by taking Lee to court, alleging that Lee never took their offer seriously.
Current stock value
Since the saga began, Lee Enterprise stock has risen, so Alden’s original offer is significantly less than the current value of the stock. Lee is now saying the original offer price is both unreasonable and unfair. As of 2:49 p.m. Eastern yesterday, Lee stock was valued at $35.33 per share.
“We believe Alden remains set on buying Lee at a deeply discounted price and taking Lee’s upside away from you and the rest of our shareholders. To advance its inadequate, hostile bid, Alden attempted to nominate three hand-selected candidates to replace the members of the Board’s Executive Committee, which includes our Chairman, our CEO and our Lead Independent Director,” the letter continued.
Lee’s argument
“We believe our strategy of aggressively expanding our digital businesses and capabilities is paying off and will create significant value for our shareholders over time. We also have improved our debt structure and continue to strengthen our balance sheet, which will enable us to make the necessary investments in talent and technology that help fuel recurring sustainable revenue growth,” said Lee.
“Lee is making great progress transforming from a traditional newspaper publisher into a digital-first business with unparalleled local brand recognition and presence in its markets. We have confidence that the Company’s strategy and execution will create significant value for shareholders over the near- and long-term,” the company added.
Not Alden’s first rodeo
Alden has a reputation for going after large media organizations and gutting them, slashing staff and costs in the name of profit. Their most recent acquisition was Tribune Publishing, a company Alden aggressively pursued until Tribune Publishing was out of options. The sale closed in May 2021 for $633 million when the company’s second-largest shareholder, Dr. Patrick Soon-Shiong, owner of the Los Angeles Times, failed to vote. He had the sole power to stop the sale, and his inaction forced Tribune Publishing’s hand. Following the completion of the sale, Alden took Tribune Publishing private.
Insider Take
What does this really mean? Since Alden’s original offer was made, Lee’s stock value has nearly doubled. Lee has a fiduciary responsibility to their shareholders to entertain reasonable offers. While Alden’s original offer was at a premium price, that $141 million price tag is no longer adequate, any shareholder would be smart to vote no to such a deal. However, we’ve seen Alden in action, and they won’t go away without a fight. We expect them to drag this out in court and to do their own wooing of shareholders to sway them to see their side of things. From a media standpoint, we would hate to see the loss of any more newspapers or newsrooms in the name of profit. This will be a nail biter.
