Alden Global Capital sues Lee Enterprises after rejected takeover bid

Alden Global Capital, a hedge fund known for consolidating local news companies for profit, is suing local newspaper company Lee Enterprises, days after Lee's board unanimously voted to reject Alden's hostile takeover bid.

Why it matters: It's the latest escalation of the already bitter battle between the two entities over Alden's bid for Lee.

Details: In a lawsuit filed by Strategic Investment Opportunities LLC, an affiliate of Alden, plaintiffs argue that Lee Enterprises' board infringed on company bylaws when it denied Alden's request to nominate three members to its board due to paperwork issues.

• "The Company has breached the Bylaws and the Director Defendants have breached the fiduciary duties they owe to Opportunities in an effort to prevent the stockholders from having a say on Lee’s future through the election of directors at the Company’s next annual meeting (the “2022 Annual Meeting”)," the lawsuit reads.
• The lawsuit also alleges that members of Lee's board "are long-time Company insiders" that they allege "have every reason to maintain the status quo and their lucrative corporate positions."
• Alden is asking a court to order that its board nominees can stand for election at Lee's 2022 annual meeting. It also wants a court to declare that the part of Lee's bylaws about paperwork related to nominating board members be ruled "unenforceable."

What they're saying: In a statement, an Alden spokesperson alleged that Lee Enterprises' "stockholder-unfriendly staggered board" is " focused more on its own power than what's best for the company."

• In response to the lawsuit, a spokesperson for Lee Enterprises said, “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.”

The big picture: Tension has been building between the two companies ever since Alden first presented its hostile takeover bid for Lee in November.

• Alden tried to quickly nominate board directors following Lee’s decision to reject Alden’s takeover offer using a corporate tactic called a “poison pill."

What to watch: Alden's initial offer for Lee was $24 per share. Ever since rejecting Alden's bid, Lee's share price has soared, closing at over $40 on Wednesday.

Editor's note: This post has been updated with a comment from Lee Enterprises.