Lee Enterprises asks investors to help fight off hedge fund

Newspaper publisher Lee Enterprises is asking its shareholders to help it fight off a hostile takeover offer from “vulture hedge fund” Alden Global Capital.

The publisher sent a letter to shareholders Monday asking them to support its board nominees in the dispute with Alden.

Based on total circulation, Davenport-based Lee is the third-largest owner of newspapers in the country, with publications operating in Buffalo, N.Y.; Omaha, Neb.; Madison, Wisc.; and St. Louis.

Lee also owns 10 newspapers in Iowa, including the Waterloo-Cedar Falls Courier, Quad-City Times and Sioux City Journal, and has a sharing a news-sharing arrangement with The Gazette.

Its stock is publicly traded on the New York Stock Exchange.

Lee already rejected Alden's $24 per share offer because it said the $141 million bid grossly undervalues Lee, but the two sides are locked in a court battle over whether Alden will be able to nominate its own directors.

“A ‘Vulture Hedge Fund’ is seeking to acquire Lee at a steep discount. Don’t let it take value that belongs to you," Lee said in its letter to shareholders.

Lee also told shareholders that they should have faith in the company's current strategy to shift its publications over to online delivery because it has seen its digital-only subscriptions grow 65 percent over the past year to 402,000 at all its newspapers.

Alden officials didn't immediately respond Monday to Lee's letter.

The New York-based hedge fund -- one of the nation's largest newspaper owners -- filed a lawsuit last month asking a judge to force Lee to allow shareholders to vote on its three nominees for the company's board ahead of Lee's March 10 annual meeting.

Lee has argued Alden's director nomination was invalid because it didn't meet technical requirements the company established before its deadline. A trial is scheduled to begin Feb. 7 in that lawsuit.

Alden owns more than 200 newspapers across the country including the Denver Post, Orange County Register and Boston Herald, and it bought all of Tribune's newspapers last year. It has developed a reputation for using extensive layoffs and severe cost cuts at the newspapers it owns.

When it announced its offer to buy Lee in November, Alden said it already owned 6.3 percent of Lee's stock. Alden first disclosed owning Lee shares in 2020 after the company bought up Berkshire Hathaway's group of newspapers.

Berkshire, which is led by billionaire Warren Buffett, thus far has been silent on Alden's takeover offer, even though it holds all Lee's $483 million in debt. At the time Berkshire sold its newspapers, Buffett said Lee was the best steward for them.

Buffett didn't immediately respond Monday to another request for comment.

Two other hedge funds that each hold more Lee stock than Alden — Cannell Capital and Praetorian Capital — have said they believe the company is worth much more than Alden is offering. Cannell holds 8.2 percent of Lee’s stock and Praetorian owns 7.3 percent.

Lee’s current board also owns or has options to buy up to 10.2 percent of the company’s stock, according to the proxy statement Lee filed Monday.

As with other newspaper publishers, Lee has been struggling with shrinking revenue as it makes the transition to digital publication because of the ongoing loss of subscribers who used to pay more for print subscriptions. The pandemic also took a heavy toll on newspapers' advertising revenue as so many businesses struggled.

Pew Research estimates the newspaper industry between 2004 and 2018 eliminated nearly half of all newsroom jobs as publications consolidated or closed.

Research from the University of North Carolina has said roughly one-quarter of the country's newspapers have closed over the past 15 years.