Alden Global Capital, the hedge fund that owns the Chicago Tribune, has made a bid for newspaper company Lee Enterprises for about $142 million.
Alden sent a letter to Lee Enterprises’ board today proposing to pay $24 per share in cash for the Davenport, Iowa-based company. That’s an almost 30% premium on Friday’s closing share price.
Lee Enterprises publishes 75 daily newspapers in 26 states, including the St. Louis Post-Dispatch, Quad-City Times, the Kenosha News, Racine Journal Times and the Times of Northwest Indiana, plus weekly publications and classifieds. Another investor group, Cannell Capital, has been pressuring Lee to restructure operations and focus more on digital.
An Alden affiliate already owns about 6% of Lee’s outstanding common stock, according to the letter. The hedge fund said in its letter to Lee’s board that “our interest in Lee is a reaffirmation of our substantial commitment to the newspaper industry and our desire to support local newspapers over the long term.”
Alden used similar language as it mounted a bid to buy Chicago Tribune parent, Tribune Publishing, earlier this year. In that case, journalists at Tribune’s papers rallied to find local ownership and circumvent Alden’s purchase. In the end, however, Alden gained full control in late May, and set to work seeking a return on its $600 million investment.
Its formula for profiting from distressed newspaper companies is widely known in the industry: cut millions in costs by slashing newsroom staff. Alden is therefore deeply unpopular among journalists.
Alden cut unionized staff by 76% at 12 newspapers it owned before its Tribune Publishing purchase. Then, in the six weeks following its purchase of Tribune Publishing, buyouts eliminated an estimated 10% of the company’s newsroom staff. Certain newsrooms, including the Chicago Tribune, lost upwards of 20%.
Alden said in its letter to Lee’s board that it is interested in reaching a transaction with “value, speed and certainty.”
“Scale is critical for newspapers to ensure necessary staffing and in order to thrive in this challenging environment where print advertising continues to decline and back office operations and legacy public company functions remain bloated, thus depriving newsrooms of resources that are best used serving readers with relevant, trustworthy and engaging content,” Alden said in the letter.
Representatives from Alden and Lee did not immediately respond to a request for comment.
Lee was founded in 1890 and counts a teenaged Mark Twain—then called Sam Clemens—among its alumni. In January 2020, Lee agreed to buy newspaper properties owned by Warren Buffett, including the Buffalo News, in a $140 million deal.
Lee has grown through acquisitions like the Buffett deal. Through the first nine months of 2021, sales rose to $600.7 million from $426.2 million a year earlier. But the company, and the industry, continue to struggle with falling revenue. Excluding acquisitions, Lee’s revenue slumped 4.7%.
Shares of Lee rose as much as 25% to $23.03. They were up 46% this year through the close Friday.