News publisher Lee faces renewed pressure from hedge funds

OMAHA, Neb. (AP) — Newspaper publisher Lee Enterprises is struggling with renewed force from a hedge fund to speed up its changeover to electronic publishing and think about adding new digital-savvy leaders to its board right after correctly fighting off a hostile takeover from a diverse hedge fund.

Lee’s biggest shareholder, Cannell Money, this week disclosed obtaining approximately 20,000 much more of the company’s shares, supplying it a 9.1% stake. The fund’s head, Carlo Cannell, claimed he thinks Lee requirements new board members and executives with expertise running a digital publishing enterprise.

“I have some assurance in (Lee’s) management — not a ton,” Cannell said in an interview. “I have wonderful or pretty minor assurance in the board relying on which board member you are referring to.”

Cannell Cash has been prodding Lee to make improvements for numerous several years. That involves working a 2019 campaign encouraging shareholders to vote in opposition to a few board associates, which include Lee Chairman Mary Junck, and asserting past September that it prepared to vote against all incumbent Lee board associates.

Cannell Capital and yet another hedge fund that owns a massive stake in Lee, Praetorian Money, also questioned the quantity Lee expended on advisors as it was fending off a $24 for each share takeover present from an additional hedge fund, Alden World Funds. But the trader who prospects Praetorian, Harris Kupperman, has indicated that he is much more relaxed with the company’s recent direction.

Cannell approximated that Lee expended somewhere between $3 million and $5 million on advice from financial commitment bankers and lawyers for the duration of the proxy battle with Alden — an total he advised may well have been superior put in on the company’s journalists. Kupperman agreed.

“I imagine the shareholders would have voted for the present guys, and they could have saved a few million bucks,” Kupperman claimed.

Lee publishes dozens of newspapers which include the St. Louis Article-Dispatch, Buffalo Information, Omaha Entire world-Herald and almost each individual other every day newspaper in Nebraska. The chain expanded noticeably in 2020 when it purchased all of Berkshire Hathaway’s newspapers and Warren Buffett endorsed Lee as the very best lengthy-phrase steward for the publications.

Lee executives have defended the progress they are producing in the company’s electronic transition. Lee representatives declined to respond to Cannell’s inquiries Thursday, but the company will update investors again next month when it releases its subsequent earnings report.

Lee explained very last quarter that it had 450,000 electronic-only subscribers and it expects that quantity to expand to 900,000 by 2026. The Davenport, Iowa-based organization reported its digital advertisement and subscription earnings grew 17%, even though its income in the three-thirty day period period that ended Dec. 26 declined practically 20% to $13.2 million.

Kupperman claimed he is generating a prolonged-term investment decision with his 7.3% stake in the organization and he thinks Lee is “on the appropriate path in terms of rising the digital subscribers.”

The stress on Lee is not probably to allow up whenever shortly, said Tim Franklin, senior associate dean of Northwestern University’s Medill journalism university and the former president of the Poynter Institute, the media imagine tank and nonprofit operator of the Tampa Bay Times. He observed hedge funds aren’t known for their endurance in waiting around for companies to expand their stock prices or earnings margins.

But he stated Lee — like all print media providers — is in the middle of the tricky transition from relying on print publication revenue to digital. The newspaper market has been contracting for yrs as additional viewers change on the internet and providers lower again on print advertisements.

“All news businesses, including Lee, are striving to stroll this balancing act of preserving as a lot of their print revenue as they probably can at the very same time that they’re seeking to mature electronic profits,” Franklin claimed. “And that desires to be accomplished with wonderful delicacy due to the fact the fate of news businesses may dangle in the stability of receiving this right.”

Lee fought strongly towards Alden’s takeover bid because the New York-dependent hedge fund has a standing for imposing extreme cost cuts and deep layoffs at the newspapers it owns, which contains all the Tribune papers it acquired very last 12 months.

Alden has not explained what its plans are for its 6.3% Lee stake following its takeover bid unsuccessful, and an Alden spokeswoman did not answer to inquiries this 7 days. The two other hedge funds with much larger stakes in Lee have stated they thought the organization is value considerably extra than what Alden provided.

Rick Edmonds, Poynter’s media analyst, mentioned it seems that buyers predicted Alden to elevate its bid or a bidding war to break out due to the fact Lee’s share price tag soared to $44.43 early this year ahead of slipping back again to $25.51 Thursday. That may open up the door for one more probable buyer.