OMAHA, Nebraska — VIDEO ABOVE: Buffalo News sold to Lee Enterprises (January 2020)
The hedge fund trying to buy newspaper publisher Lee Enterprises returned to court Tuesday in a bid to settle a dispute over how votes for two longtime board members should be counted next month at the company's annual meeting.
Alden Global Capital has already lost one lawsuit in the takeover battle when a judge decided last week that it wouldn't be able to nominate its own directors at Lee's March 10 annual meeting. Now it wants the court to decide how many votes Lee's chairman and its lead independent director need to be re-elected.
This new lawsuit is the latest round in the fight that began in November when Alden offered to add Lee to its growing collection of newspapers by paying $24 a share, or roughly $141 million, for the Davenport, Iowa, based company. The publisher of the St. Louis Post-Dispatch, Omaha World-Herald and dozens of other newspapers rejected Alden's bid in December, saying said it “grossly undervalued” the company.
Alden said in a statement announcing the lawsuit Tuesday that Lee is “brazenly disenfranchising shareholders by rigging the upcoming director election to guarantee the re-election of entrenched directors who have profited substantially even while the company is in a downward spiral and its journalism is suffering.”
Alden objects to Lee’s decision to use a plurality standard for the director vote because it would essentially guarantee their re-election and negate any “no” votes. As long as the directors get at least one “yes” vote, that is more than any other candidate could get because they are running unopposed. The New York-based hedge fund that owns more than 200 newspapers argues the directors should have to win the majority of the votes cast to keep their seats.
Alden also wants Lee to enforce a rule in its bylaws that says directors who don’t win a majority of the votes must immediately resign.
Lee said in a statement that it is “disappointed, but not surprised” by the lawsuit. It said "Alden continues to pursue increasingly desperate measures in an attempt to destabilize Lee and advance its grossly undervalued hostile proposal to purchase the company," .
Part of why Lee is fighting the takeover so hard is that Alden has a reputation for imposing deep cost cuts and layoffs at the newspapers it owns, which include all of Tribune's and MediaNews Group's papers that it bought in recent years.
Alden, which owns 6.3% of Lee's stock, argues that the company has underperformed since it bought all of Berkshire Hathaway's newspapers in 2020, but Lee has defended the progress it is making in increasing its digital subscriptions and online ad revenue.
Two other hedge funds that own significant Lee stakes have said they believe the newspaper publisher is worth considerably more than Alden has offered.