Hedge fund Alden Global Capital's attempt to stage a hostile takeover of major newspaper publisher Lee Enterprises was dealt a blow on Tuesday when a judge ruled that Lee could ignore Alden's two nominees to the board of directors.
According to Lee, "A Delaware judge supported its decision to reject Alden’s nominees because the hedge fund didn’t meet Lee’s technical requirements to nominate board members," Josh Funk reports for The Associated Press. "Late last year, Lee rejected Alden’s $141 million offer, saying that it 'grossly undervalues' the publisher of the St. Louis Post-Dispatch, Tulsa World, Richmond Times-Dispatch and dozens of other newspapers." (Lee is based in Iowa, but incorporated in Delaware.)
Alden, which owns 6.3% of Lee's stock, "said it will press the fight by urging shareholders to vote against Lee Chairman Mary Junck and one other longstanding board member at the company’s March 10 annual meeting," Funk reports. Alden "said it is looking out for other shareholders because it believes Lee has underperformed since it bought all of Berkshire Hathaway’s newspapers in 2020 and has been struggling with the transition to publishing news online."
Lee countered that it is growing digital subscriptions and online revenue. Its fourth-quarter 2021 financials showed a 65% increase in digital-only subscriptions from the prior fiscal year and a 34% increase in total digital revenue (including subscriptions and advertising) in the same period.
Lee has resisted Alden's attempts at a takeover since November, adopting a "poison-pill" strategy that would devalue its stock in the event of a takeover. Alden is known for imposing extreme cost-cutting measures and layoffs at other publications to increase profits. If Alden took over Lee, a clear majority of U.S. dailies would be owned by hedge funds. The move would also create a "local news duopoly" between Gannett (which merged with Gatehouse in 2019) and Alden, Sara Fischer reports for Axios.
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