Mar 29, 2022 - Economy

Lee quietly slashes jobs following hostile takeover attempt

Illustration of a skull and bones made out of newspaper

Illustration: Sarah Grillo/Axios

Lee Enterprises has been quietly laying off top editors and other staff across its local papers. The cost-cutting moves come after an unsolicited takeover bid from Alden Global Capital, a hedge fund known for consolidating local news for profit.

Why it matters: Journalists at Lee-owned papers across the U.S. say that at this point, they don't know whether staying independent or a hedge fund takeover is worse. "If Alden is a cancer on journalism, Lee is COVID, MRSA and SARS," one former editor told Axios.

Data: Yahoo! Finance; Chart: Axios Visuals

Details: At least eight staffers — many of them top editors — have been laid off across five newsrooms in the past two months at various local papers owned by Lee, one of the last remaining independent local newspaper companies.

  • The Richmond Times-Dispatch lost three staffers to layoffs in mid-February (Disclosure: One of those staffers currently works on a part-time basis for Axios).
  • The Bristol Herald Courier laid off its city editor in early February.
  • The Omaha World-Herald laid off at least two editors in February.
  • The Greensboro News and Record and the Winston-Salem Journal's executive editor was laid off in February, according to two sources familiar with the situation.
  • The Free Lance-Star lost its executive editor. A new managing editor was announced shortly after. Lee never publicly acknowledged the cut.

Catch up quick: Alden first presented a hostile takeover bid for Lee last November, sparking panic among journalists, local news advocates and regulators.

  • Lee quickly enacted a "poison pill," a corporate tactic to give Lee shareholders more time to review Alden's proposal.
  • In response, Alden quickly tried to nominate directors to Lee's board, which Lee promptly rejected. A court upheld Lee's decision in February. Lee's shareholders reelected all three of Lee's board nominees at its March shareholders meeting.
  • Alden's reputation for gutting newsrooms includes laying off nearly one-third of the Denver Post's newsroom in 2018 and implementing steep buyouts after acquiring the Chicago Tribune in 2021.

Be smart: In its Feb. 3 investor presentation, Lee didn't mention the hedge fund's reputation for dismantling entire newsrooms but noted "Alden is viewed skeptically by newsrooms, journalists and newspaper staffers across the industry, and Lee's employees are concerned about their futures."

Between the lines: Former and current staffers of Lee-owned papers suggested to Axios that Lee is using Alden's track record of buyouts and cuts to try to dissuade investors from approving a hostile takeover, even though Lee itself has cut from its newsrooms in recent years.

  • Lee laid off at least 70 staffers, many in editorial, across several states amid the pandemic, in addition to implementing furloughs and cost-cutting measures, according to Poynter.
  • Former Lee employees told Axios and have publicly expressed their frustration over payouts to Lee management amid the newsroom cuts.
  • The Omaha World-Herald Guild tweeted, "Rational folks would be right to question why Lee is dolling out that much money to executives during a hostile takeover attempt, let alone while they gut newsroom and newspapers."

By the numbers: Alden offered to acquire Lee for $24 per share, a 30% premium on Lee's share price at market close the previous business day before Alden's initial proposal.

  • Following Alden's hostile takeover bid, Lee's stock skyrocketed to a high of $43.21 in January.
  • But today, Lee trades at $26 per share — just two dollars north of Alden's bid, which it hasn't budged on.

The big picture: Over the past two quarters, Lee's quarterly revenues have either declined or grown modestly compared to the prior year, while compensation continues to grow.

  • Lee declined to comment for this story.
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