If a strongly worded announcement from Lee Enterprises Friday is any indication, the Davenport-based media company’s position on a hostile takeover bid doesn’t look good for the investment firm hoping to buy it.
Lee said that a notice submitted by Alden Global Capital, LLC, which sought to nominate three candidates to stand for election to Lee’s Board of Directors at the company 2022 annual meeting, is invalid. New York-based Alden — the second-largest owner of newspapers in the nation — on Nov. 22 proposed to purchase Lee for $24 per share in cash, or an estimated total of $141 million.
Lee’s board thoroughly reviewed Alden’s notice for board members and found the submission didn’t meet several essential requirements clearly set forth in Lee’s publicly available bylaws. The Lee board Friday made the following statement:
“Lee’s bylaws provide a very clear and simple procedure for investors to nominate candidates for election to Lee’s Board of Directors. The nomination procedure and information requirements in our bylaws are consistent with those of the vast majority of public companies incorporated in Delaware. Over the past few years, hundreds of investors – including many that have been advised by Alden’s two law firms – have properly fulfilled these types of notice requirements and information requests.
“Alden, however, failed to meet the most basic and most important requirement of our director nomination procedure: demonstrating it is eligible to nominate directors. Instead of following the straightforward process outlined in Lee’s bylaws to provide proof that Alden is an eligible shareholder, Alden attempted to circumvent the requirement by having an unrelated, third-party shareholder send a cover letter attaching an incomplete and internally inconsistent nomination notice from Alden. In addition, Alden’s nomination notice does not comply with several other substantive requirements of Lee’s bylaws.
“Alden’s hasty and convoluted attempt to work around our simple and common procedure on the eve of the nomination deadline does not meet the clear requirements of Lee’s bylaws. Alden’s failure is entirely of its own making. Alden is not entitled to invent its own process for its convenience.”
Lee’s board determined that Alden’s attempted nomination notice doesn’t satisfy the clear requirements of its bylaws. Because Alden failed to deliver a notice that complies with Lee’s requirements prior to the deadline, Alden cannot nominate any candidates for election to the board at the 2022 annual meeting, which has yet to be scheduled.
Accordingly, Lee will not recognize Alden’s nominations, and any proxies submitted, or votes cast, for the election of Alden’s director candidates will be disregarded. The hedge fund owns approximately 6 percent of Lee stock.
On Nov. 22, Alden made an unsolicited non-binding proposal to buy the company for $24 per share in cash. In consultation with its financial and legal advisors, Lee’s board is evaluating Alden’s proposal to determine the course of action it believes is in the best interests of the company and Lee shareholders, the company said Friday.
Davenport-based Lee Enterprises owns the Quad-City Times, The Dispatch and Rock Island Argus, and Muscatine Journal, among newspapers in 77 markets in 26 states. Year to date, Lee’s papers have average daily circulation of 1 million.
Alden said that its buyout offer represented a “substantial premium” of approximately 30% to Lee’s closing share price of $18.49 on Nov. 19. “We have the ability to fully finance this all-cash proposal and the definitive merger agreement will not include a financing condition,” Alden’s letter to Lee’s board said. On Dec. 3, Lee’s share price hit a high of $25.80, above the Alden per-share offer.
Some of Lee’s properties expressed outrage following the offer, calling on Lee’s board to reject the deal. The union for the Casper News-Tribune, Wyoming’s largest newspaper, tweeted: “We have seen how Alden has systematically slashed staff across its newsrooms, including those acquired from Tribune Publishing earlier this year.”
“Over the past few years, our news staff has already been significantly reduced, but the cuts are small compared to what has been suffered at Alden-owned papers,” said the Casper News Guild. “Alden has a history of gouging papers and we cannot afford to lose any other positions. We urge the Lee Enterprises board of directors to decline the offer in the interest of preserving quality local news.”
A Lee spokesperson said later Friday that the company did not have any further comment on the evaluation process at this time.