Hedge fund loses ruling in Lee Enterprises takeover fight

OMAHA, Neb. — A judge has cleared the way for newspaper publisher Lee Enterprises to use a voting system that will ensure two longtime directors are reelected at its upcoming annual meeting despite the objections of a hedge fund that is trying to buy the company.

The Davenport, Iowa-based publisher said the Delaware judge rejected Alden Global Capital’s motion for an injunction in Alden’s latest lawsuit Friday. Earlier in February, a judge also blocked Alden’s effort to nominate its own directors at Lee’s March 10 annual meeting.

“This is now the second court ruling in less than two weeks rejecting Alden’s desperate efforts to destabilize Lee and push its grossly undervalued proposal to purchase the company,” Lee said in a statement.

Alden didn’t immediately comment on the ruling.

The publisher of the St. Louis Post-Dispatch, Buffalo News, Lincoln Journal Star and dozens of other newspapers rejected Alden’s $141 million takeover offer in December. The New York-based hedge fund is already one of the nation’s largest newspaper owners, but it has a reputation for imposing severe cuts and layoffs at the publications it owns.

Alden objected to Lee’s decision to use a plurality standard for the director vote because it will essentially guarantee the reelection of Lee’s chairman and its lead independent director. 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. Alden wanted the directors to have to win the majority of the votes cast to keep their seats.

Alden, which owns 6.3% of Lee’s stock, says change is needed because the company has delivered disappointing results since buying all of Berkshire Hathaway’s newspapers in 2020. But Lee has said it is making good progress in growing online ad revenue and digital subscriptions.

Lee’s board has received support from two other hedge funds that hold stakes in the publisher because they have said Lee is worth significantly more than the $24 per share Alden has offered.