Newspaper publisher Lee rejects takeover bid for Alden hedge fund
Newspaper publisher Lee Enterprises has rejected an offer to take over hedge fund Alden Global Capital, one of the nation’s largest newspaper owners, known for cost cuts and intense layoffs, but the fight for the future of the business is probably far from over.
said Thursday that its board of directors had unanimously rejected Alden’s offer to buy the company for $ 24 per share, or about $ 141 million, because it was not in the best interests of shareholders. Also on Thursday, Lee reported a profit of $ 5.3 million in the fourth quarter of this year, rebounding from a loss of $ 1.3 million a year ago as digital-only subscribers count in the company increased 65% to 402,000.
“Alden’s proposal greatly underestimates Lee and fails to recognize the strength of our business today, as the fastest growing digital subscription platform in local media, and our prospects for compelling future, ”said Lee President Mary Junck.
But Ken Doctor, a longtime media analyst who now runs a local online journalism startup called Lookout Santa Cruz in Calif., Said Alden likely won’t drop his offer to acquire Lee because he believes he can pull money. company profits with the model he has used elsewhere which calls for selling the chain’s real estate and drastically cutting costs.
“What Alden has done – and it’s now fairly proven community-to-community – is reap the ultimate profits from the newspaper business and he’s doing it without apologies,” the doctor said.
Alden said last month when he made his offer that he already owned more than 6% of Lee’s shares. The New York-based hedge fund did not immediately respond to Lee on Thursday.
Steve Waldman, president of Report for America, an organization that places journalists in local newsrooms, including the Associated Press, said Alden’s approach to managing newspapers has a huge impact on communities that ‘they cover because of cuts in newsrooms. Alden and other hedge funds already own half of the nation’s daily newspaper circulation, he said.
“When newspapers see their reporting staff gutted, it means governments are not held to account, corruption increases, waste increases, voter turnout decreases, residents do not have the basic information they need to solve the problems of their communities, “said Waldman.
Even if Lee succeeds in turning Alden down, he will likely be pressured to sell himself to someone else over the next couple of years or find a suitor willing to privatize the company.
In this regard, Lee might be able to enlist the help of his biggest financier, Warren Buffett’s Berkshire Hathaway BRKB,
who has held Lee’s $ 483 million debt since Berkshire decided to sell his newspaper chain to Lee in 2020. At the time, Buffett praised Lee as the best steward for his newspapers. Buffett did not immediately respond to a request for comment Thursday.
The newspaper industry is struggling to cut revenues as it makes the transition to digital publishing, and the pandemic has only intensified those tensions. Pew Research has estimated that nearly half of all newsroom jobs were cut between 2004 and 2018, when newspapers were consolidated or closed. About a quarter of newspapers across the country have closed in the past 15 years, according to a University of North Carolina study.
But earlier this week, Lee received backing from its second-largest shareholder, Praetorian Capital, who owns 7.3% of Lee’s shares. Investment manager Harris Kupperman said in a letter to Lee’s board on Wednesday that he believed the company’s shares were worth at least $ 100 apiece, well above Alden’s opportunistic bid.
“The only reason stocks trade where they do is because investors have yet to realize that while the traditional print newspaper industry is slowly declining, the digital industry has grown rapidly. becoming an increasingly important percentage of total business, ”Kupperman wrote. .
After Alden made his unsolicited offer, Lee adopted a “poison pill” plan that would make it more costly for Alden to buy back Lee’s shares once he owns more than 10% of the company. Lee also pushed back on Alden’s attempt to appoint three new directors to the company’s board of directors.
If Alden acquires 10% of the shares, the shareholder rights plan adopted by the Davenport, Iowa-based company would allow its other shareholders to buy shares at a 50% discount at this point or possibly from get free shares for every share they already own. .
Lee owns the St. Louis Post-Dispatch, The Buffalo News, and dozens of other newspapers, including nearly all of the Nebraska dailies. The unions at those newspapers urged Lee to push back Alden’s advances over concerns about what the hedge fund would do.
“We must remain vigilant, this offer will not be the last of the assassin. Alden not only grossly underestimates journalism, he grossly undermines it, ”the union representing Lee’s journalists at the Omaha World-Herald tweeted Thusday.
Alden has recovered newspapers across the country through a series of acquisitions in recent years, including the purchase of Tribune newspapers earlier this year. Alden also owns the Denver Post, the San Jose Mercury News, and the Boston Herald.
Lee’s stock rose 11% Thursday to close at $ 27.70, nearly $ 4 above what Alden offered.