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Hedge fund with a reputation for 'gutting newsrooms' takes aim at owning Pantagraph newspaper publisher Lee Enterprises

Eric Stock
/

A New York hedge fund with a reputation for shrinking newsrooms not long after buying them out is taking aim at the media company that owns the Bloomington-based Pantagraph.

Alden Global Capital made an offer to Lee Enterprises on Monday morning. Lee Enterprises is the owner of three newspapers in Central Illinois, including the Herald & Review in Decatur; the Journal Gazette-Times Courier in Mattoon and the The Pantagraph in Bloomington. The Iowa-based company also owns The Southern Illinoisan in Carbondale.

Alden Capital offered to buy out Lee Enterprises for $24 per share in stock — a price that's 30% higher than the company's price at close on Friday.

The offer from Alden — which owns about 6% of Lee Enterprises already — represents a purchase the group said it was ready to "fully finance" in "all-cash." Poynter Institute media business analyst Rick Edmonds told WGLT Monday that deal represented about $680 million on Alden's part.

"There's a little bit of a trick there: Alden already owns about 6% of the stock, so for the remaining 94% they'd be paying around $135 million," he said in an interview. "But they also have to assume Lee's debt, which is about another $550 million, so (the purchase) is going to be around $680 million when you put those two things together."

If the deal is agreed upon, Alden said in its offer letter it would take about four weeks to complete the takeover.

“We believe that as a private company and part of our successful nationwide platforms, Lee would be in a stronger position to maximize its resources and realize strategic value that enhances its operations and supports its employees in their important work serving local communities,” the hedge fund's offer letter read. “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.”

A spokesperson from Lee was not immediately available for comment.

Edmonds said stock prices "at lunchtime" Monday showed "that the market thinks the deal is likely but not certain to go through."

His own opinion is, "I think it's likely that it will happen," he said. The price Alden offered is "attractive to shareholders to approve it — the board and shareholders. There's always (a) possibility somebody else will come along with a higher bid, or the company will try to resist, but I think it's likely that Alden will be in control of that whole group of papers by by early next year."

Alden Capital already took over one Illinois newspaper earlier this year: In May, the Manhattan-based group finalized a deal to take over Tribune Publishing in a $633 million deal. That landed the company the Chicago Tribune, The Baltimore Sun and New York Daily News properties, among others.

Staffing cuts to the Chicago Tribune newsroom came within days of the deal's closure.

According to Edmonds' analysis of the company for Poynter Institute, Alden Capital "has developed a reputation for slashing staff in newsrooms and other departments and selling off real estate at outlets it owns. ... Besides investing little in news, it lags the industry in technology upgrades and digital subscription growth."

Margaret Sullivan, a columnist for The Washington Post, has called Alden "one of the most ruthless of the corporate strip-miners seemingly intent on destroying local journalism."

Vanity Fair dubbed Alden the "grim reaper of American newspapers."

The Atlantic called it "a secretive hedge fund that's gutting newsrooms."

Just last year, Lee Enterprises finished its own acquisition of another company. In March, the company purchased publications from the Berkshire-Hathaway Media Group (BHMG), along with The Buffalo News.

According to a news release at the time, that merger "nearly doubled Lee’s audience size and added 30 daily newspapers, more than 49 paid weekly publications with digital sites, and 32 other print products from BHMG." Following the purchase, Lee owned 77 different publications 77 media markets.

At the time, Berkshire-Hathaway Chairman and CEO Warren Buffett told USA Today that “We had zero interest in selling the group to anyone else for one simple reason: We believe that Lee is best positioned to manage through the industry’s challenges."

Lee Enterprises already had its own reputation for cutting newsroom staffers after taking over. According to data aggregated by the Poynter Institute, the company laid off at least 50 newsroom staffers during the pandemic last year.

Earlier this year, the company also announced it would cut staff from the newsroom at The Roanoke Times. According to the paper's union, staff at that paper was cut by more than 25% since early 2020, when it was acquired by Lee Enterprises.

Locally, The Pantagraph has seen deep cuts in the number of full-time staffers in the newsroom. Full-time staff totals have dropped 70% in the last 15 years.

Copyright 2021 WGLT. To see more, visit WGLT.