Lee Enterprises responded to Alden Global Capital’s acquisition proposal with a poison pill, also known as a “shareholder rights plan”. This tactic is often used by corporate boards when they are trying to avoid being the target of a hostile takeover by a larger firm. According to Investopedia, such plans are usually triggered whenever one individual or entity obtains a particular percentage of total ownership.
The Lee Board of Directors unanimously adopted the limited-duration shareholder rights plan today. Furthermore, the plan is effective immediately. The Board states that they have “noted Alden’s track record of rapidly acquiring substantial control or ‘negative control’ positions in other public companies”. In addition, they claimed Alden had “inconsistent disclosures” on SEC filings. Specifically, on its Schedule 13Ds and Form 13Fs. Those filings were regarding Alden’s “purported ownership of Lee’s shares”.
“Consistent with its fiduciary duties, Lee’s Board has taken this action to ensure our shareholders receive fair treatment, full transparency and protection in connection with Alden’s unsolicited proposal to acquire Lee. This Rights Plan will provide Lee’s Board and our shareholders with the time needed to properly assess the acquisition proposal without undue pressure while also safeguarding shareholders’ opportunity to realize the long-term value of their investment in Lee.”
Lee Chairman Mary Junck
Furthermore, Lee says this plan is to “guard against tactics to gain control of the Company without paying all shareholders an appropriate premium for that control”.
Lee Enterprises Fact Box * Based in Davenport, Iowa * Founded in 1890 in Iowa, by A.W. Lee. * Provider of local news in 77 U.S. markets and communities * Newspapers include The Fredericksburg, Virginia Free Lance Star, Rapid City Journal in South Dakota and the Winston-Salem Journal in North Carolina * Had digital revenues of $66 million in Q3 2021 and 337,000 digital only subscribers * Average daily circulation of 1 million copies * 47 million digital unique visitors
The Alden Offer and Potential Powerhouse
On Monday, Alden Global Capital sent Lee Enterprises an unsolicited proposal. The non-binding offer was to purchase Lee Enterprises for $24.00 per share in cash. At the time, the Lee Board claimed it would “carefully review” the Alden proposal.
Alden successfully bought Tribune Publishing earlier this year. With that purchase and MediaNewsGroup, Alden controls media properties in half of the top 10 markets in the United States. This includes the three biggest media markets in the country, New York, Los Angeles and Chicago.
THE TRIBUNE PUBLISHING-ALDEN GLOBAL CAPITAL SAGA Alden Global Capital Offers to Buy Tribune Publishing - December 31, 2020 Tribune Responds to Alden Acquisition Proposal - January 1, 2021 Connecticut Attorney General Has Questions For Alden - January 29, 2021 Alden Global Capital Will Acquire Tribune Publishing - February 16, 2021 Stewart W. Bainum Jr. Wants to Acquire Tribune - March 16, 2021 Tribune Deems Bainum-Wyss Proposal as Potentially “Superior” - April 5, 2021 Here’s Why Tribune Continues to Recommend Alden Merger Deal - April 16, 2021 Report: Hansjörg Wyss Pulls Out of Bid For Tribune - April 17, 2021 Tribune Deems Bainum Offer No Longer Reasonably Expected to Lead to a “Superior Proposal” - April 19, 2021 Does Anyone Want to Buy The Chicago Tribune? - May 1, 2021 State Treasurers Urge Tribune To Consider Bainum Bid - May 14, 2021 Tribune Publishing Shareholders Vote For Alden - May 21, 2021
Lee would further expand Alden’s reach with a set of second and third tier markets, like Fredericksburg, Virginia. Furthermore, Lee has touted a new strategy based on recurring digital revenues. However, their Q3 pro forma total operating revenue declined 4.7%. A network approach as part of Alden’s other platforms could strengthen Lee’s shared goal of informing local communities.
Alden President, Heath Freeman, in his letter to Lee reconfirmed his commitment to local journalism and newspapers specifically.
“We believe that as a private company and part of our successful nationwide platforms, Lee would be in a stronger position to maximize its resources and realize strategic value that enhances its operations and supports its employees in their important work serving local communities. Our interest in Lee is a reaffirmation of our substantial commitment to the newspaper industry and our desire to support local newspapers over the long term.“
Heath Freeman, President, Alden Global Capital
Furthermore, Freeman had hoped to work constructively with the Lee Board of Directors. Those hopes are dashed for now with the poison pill tactic. Freeman wrote, “Scale is critical for newspapers to ensure necessary staffing and in order to thrive in this challenging environment.” Additionally, he pointed to bloated back office operations and legacy public company functions.
