Nov 26, 2021 - Economy

Lee Enterprises tries to deter hostile takeover by hedge fund

The Chicago Tribune office. Photographer: Christopher Dilts/Bloomberg via Getty Images

Lee Enterprises on Wednesday said its board of directors unanimously voted to adopt a new measure that would make it harder for Alden Global Capital — a hedge fund known for consolidating local newspapers — to buy out the publicly-traded firm.

Why it matters: Lawmakers, local reporters and journalism advocates have been sounding the alarm over Alden's unsolicited bid. Alden is known for buying local newspaper companies and instituting deep cuts to squeeze profits.

  • A spokesperson for Alden Global Capital did not immediately respond to Axios' request for comment.

Details: Lee Enterprises' board voted to adopt a shareholder “rights plan" that gives shareholders more time to review Alden's proposal "without undue pressure," the company's chairman Mary Junck said in a statement.

  • The new measure, dubbed a "poison pill" in the business industry, would kick in if Alden were to take a 10% stake or more in the company's outstanding common stock.
  • At that point, shareholders would have the ability to purchase shares at a 50% discount, diluting the stock and making it more costly for Alden to increase its stake in the company.
  • The plan expires within a year unless Lee Enterprises terminates it sooner. The Wall Street Journal first reported on Lee Enterprises' plan on Wednesday.

Be smart: In a statement, Lee's Board said it was taking these actions in response to "Alden’s track record of rapidly acquiring substantial control or 'negative control' positions in other public companies" and "its seemingly inconsistent disclosures" on regulatory forms regarding its ownership of Lee’s shares.

  • Alden Global Capital bought out the remainder of Tribune Publishing in February, after increasing its stake in the company from 25% to 33%.

Catch up quick: Lee Enterprises executives said earlier this week that consistent with its fiduciary duties, it was obliged to review the unsolicited bid.

  • Alden Global Capital on Monday offered to acquire Lee Enterprises for $24 per share, a 30% premium on Lee's share price at market close last Friday.

The big picture: Local newspaper companies are increasingly being swallowed up by private investment firms that aren't incentivized to invest in their longevity, causing concern about the future of local news.

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