Alden Global Capital won’t take no for an answer. The hedge fund known for gutting media companies is taking Lee Enterprises to court, alleging that Lee didn’t take their unsolicited cash offer of $141 million to buy the company seriously. They also allege that, by rejecting three Alden nominees for Lee’s board of directors, Lee was trying to protect managers who maintain the status quo and their positions, according to Poynter.
In an interesting move, Alden said in the lawsuit that its proposal to buy Lee Enterprises at 30% over market value was just a starting point for a discussion. Alden was hoping to have a constructive dialogue with Lee Enterprises, but now the gloves are off.
Since Lee Enterprises rejected Alden’s offer and implemented a “poison pill” defense to prevent Alden affiliates from buying shares of stock beyond 10% over the next year, Alden tried another tactic. They nominated three candidates to Lee’s eight-member board of directors in an attempt to take over the company that way. If that move sounds familiar, Alden did something similar to Tribune Publishing, who Alden now owns.
Lee rejected Alden’s board nominations because they didn’t adhere to the company’s bylaws.
In a statement from the Board, they shared, “Lee’s bylaws provide a very clear and simple procedure for investors to nominate candidates for election to Lee’s Board of Directors. The nomination procedure and information requirements in our bylaws are consistent with those of the vast majority of public companies incorporated in Delaware. Over the past few years, hundreds of investors – including many that have been advised by Alden’s two law firms – have properly fulfilled these types of notice requirements and information requests. Alden, however, failed to meet the most basic and most important requirement of our director nomination procedure: demonstrating it is eligible to nominate directors. 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.”
In addition, Alden failed to meet the deadline for nominations and cannot nominate candidates at the 2022 annual meeting. Any nominations received from Alden, including proxies, will be disregarded along with any votes for Alden-nominated candidates.
“The Company has breached the Bylaws and the Director Defendants have breached the fiduciary duties they owe to Opportunities in an effort to prevent the stockholders from having a say on Lee’s future through the election of directors at the Company’s next annual meeting (the “2022 Annual Meeting”),” Alden’s lawsuit reads.
According to Axios, Alden is asking the court to allow its board nominees to be considered at Lee’s annual meeting. They also want the court to refute Lee’s bylaws regarding nominating board members. A spokesperson for Lee Enterprises said the director nominations were invalid and Lee has its shareholders’ best interests in mind, despite Alden’s claims.
We knew this was going to get ugly as soon as the unsolicited cash offer was announced. Alden doesn’t like to lose, and they don’t seem to care about journalism or communities, just profit centers. In fact, they seem to really enjoy the chase, and they will stop at nothing to win. This is not good news for Lee Enterprises or for journalism as Alden sets its sights on owning a bigger share of U.S. newspapers.