The Alden Global Capital hedge fund stepped up its attempts to buy Lee Enterprises this week, filing a lawsuit that accuses its board of denying shareholders of the newspaper publisher a voice in the matter.
The publisher of the St. Louis Post-Dispatch, the Buffalo News and dozens of other newspapers rejected Alden's offer to buy the company for $24 a share, or roughly $141 million, last Thursday calling the bid, “grossly undervalued.”
Alden argued in the lawsuit filed Wednesday that Lee shouldn't have rejected its offer without even talking to the hedge fund. Alden also said Lee shouldn't have refused to accept its nomination of three outside directors for technical reasons and has asked the court to order Lee to accept those nominees.
“Lee’s stockholder-unfriendly staggered board has exhibited all of the symptoms of severely entrenched leadership focused more on its own power than what’s best for the company,” Alden spokesperson Cameron Gurley said.
Alden also said in a filing with the Securities and Exchange Commission Thursday that it plans to send Lee shareholders information about its director nominees in a proxy filing ahead of the company's 2022 annual meeting, which is likely to be held in February.
Lee has been steadfast so far in its opposition to Alden, and the company said it doesn't think the hedge fund will prevail in court.
“As we explained in detail on December 3, Alden’s director nomination notice was clearly invalid and we remain committed to acting in the best interests of all shareholders. Alden’s claims are baseless,” a Lee spokesman said in a prepared statement.
The New York hedge fund that owns 6.3% of Lee’s stock became one of the largest newspaper owners in the nation after swallowing all of Tribune’s newspapers earlier this year, but it has a history of imposing severe cost cuts and layoffs at newspapers.
Two other hedge funds that are among Lee's largest shareholders, Praetorian Capital and Cannell Capital, have said they think the company is worth much more than Alden is offering.
“I think there is still a tremendous amount of value,” said Carlo Cannell, managing director of the Wyoming-based fund. In fact, Cannell estimates Lee's stock could be worth $285 a share within five years if the company does everything right as it continues to transition more toward digital instead of print publication.
Alden said in its lawsuit that it intended its $24 offer to be preliminary, and it could have been changed if the company had engaged in constructive talks.
It remains unclear how Lee’s biggest financier, Warren Buffett’s Berkshire Hathaway, feels about the situation. Buffett has yet to comment and he didn’t immediately respond to questions Thursday. Berkshire has held all of Lee’s debt since it decided to sell its newspaper chain to Lee in 2020. At that time, Buffett said he believed Lee was the best long-term home for Berkshire’s newspapers.
Lee’s stock dropped more than 7% Thursday to $37.52. Before Alden made its initial bid, the stock was selling for $18.49.
Before rejecting Alden's bid, Lee adopted a “poison-pill” plan that would make it more expensive for Alden to buy up Lee’s shares once it owns more than 10% of the company. At that point, the plan would allow Lee's other shareholders to buy shares at a 50% discount or possibly get free shares for every share they already own.
Lee publishes nearly every daily newspaper in Nebraska in addition to those in St. Louis and Buffalo. Unions that represent journalists at those papers have come out strongly against Alden.
Alden has bought up roughly 200 publications across the country in recent years through a series of acquisitions. Besides the Tribune papers, Alden also owns the Denver Post, Orange County Register and Boston Herald.