Davenport-based newspaper publisher Lee Enterprises is getting $50 million in investments, a new chairman of its board, and its current CEO has announced his retirement.
Lee Enterprises announced today, Tuesday, Dec. 30, that it has entered into a definitive stock purchase agreement for a $50 million strategic equity investment in the company’s common stock. The investment is led by David Hoffmann with participation from other existing investors in the company, providing Lee with committed capital and a strengthened financial and governance foundation, according to information from Lee Enterprises.
In the Quad Cities region, Lee is the publisher of the Quad-City Times, The Dispatch/Rock Island Argus and Muscatine Journal newspapers. It publishes more than 350 weekly and specialty publications serving 73 markets in 26 states.
As part of this deal, Mr. Hoffmann is expected to assume the role of chairman of the Lee Enterprises Board of Directors, according to a Lee news release.
Mr. Hoffmann is a renowned entrepreneur and philanthropist. As the founder and chairman of Hoffmann Family of Companies, he oversees a family-owned network of enterprises that employs over 17,000 people worldwide. This network includes more than 200 distinct brands and properties spanning 30 countries.
“This transaction strengthens the company’s balance sheet and reflects the board’s determination to take decisive action,” said Mr. Hoffmann in a news release. “With improved financial stability and a clear governance framework in place, the focus can now be on disciplined execution and long-term value creation.”
The Hoffmann Family of Companies announced last year that it purchased about 10% of Lee Enterprises. In recent times, it has been buying newspapers and media companies. In fact, on Tuesday Hoffmann announced it had just purchased the Aspen (Colorado) Daily News.
This summer, The Hoffmann Family of Companies submitted a letter to Lee Enterprises’ Board of Directors expressing interest in supporting a potential recapitalization of Lee.
That proposal outlined a $25 million investment in the newly issued common equity at a price of $2 per share, alongside a $25 million fully backstopped rights offering to existing shareholders at the same price. This structure implies a pre-money enterprise valuation of about $462 million, based on Lee’s current debt obligations and outstanding shares.
“HF Companies believes this proposal offers a fair, transparent and constructive path toward recapitalizing Lee Enterprises – enhancing long-term financial stability and supporting continued investment in the company’s digital transformation strategy,” according to a July statement from Hoffmann.
Lee CEO is retiring
In today’s announcement, Kevin Mowbray, Lee’s president and chief executive officer, announced his retirement. Lee expects its current chief operating officer, Nathan Bekke, to serve as interim chief executive officer, and the board has initiated a search for a permanent CEO.
Mr. Mowbray joined Lee in 1986, and over his 39-year career, he served in 13 Lee markets.
“This transaction reflects the board’s determination to act decisively,” said Mary Junck, current chair of the board, about the investment deal in a news release. “By strengthening the balance sheet and improving the company’s capital structure, we are putting the company in a better position to execute and create long-term value.”
Under the agreement, Lee has entered into a $50 million private placement of common stock at an investment price of $3.25 per share anchored and fully backstopped by Mr. Hoffmann, who initially committed a minimum of $20 million, with the remaining $30 million allocated to other top existing investors. As a result of the subscription levels and backstop, at signing, Mr. Hoffmann has committed approximately $35 million, with additional investors committing approximately $15 million.
The closing of the $50 million investment is expected to satisfy a condition to amend the company’s existing credit facility, reducing the annual interest rate on approximately $455.5 million of the company’s outstanding long-term debt to 5% from 9% for a five-year period, materially improving the Company’s capital structure and cash flow outlook.
Last month, Lee Enterprises announced it was looking to raise up to $50 million to support the company’s planned digital transformation.
Lee on Nov. 10, announced plans in a news release as well as in an SEC filing to initiate a proposed equity rights offering.
An equity rights offering is a way for a company to raise capital by giving existing shareholders the option to buy new shares, typically at a discount to the market price, to maintain their proportional ownership. Shareholders can choose to exercise their rights by buying new shares, sell their rights to other investors, or let their rights expire, which would result in their ownership stake being diluted, according to Nasdaq.com.
