Davenport-based newspaper publisher Lee Enterprises has survived one fight with a hedge fund. Now, a second round of fighting with a different hedge fund might be in the works.
Cannell Capital officials said this week they want the newspaper publisher to speed up its transition to digital publishing. Cannell recently disclosed the purchase of nearly 20,000 more shares of Lee’s stock, giving it a 9.1% stake in the publishing company, according to several media reports, including the Washington Post.
Cannell Capital’s head, Carlo Cannell, said he thinks Lee needs new board members and executives with experience running a digital publishing business.
“I have some confidence in (Lee’s) management — not a lot,” Mr. Cannell said in a recent interview with the Washington Post. “I have great or very little confidence in the board depending on which board member you are referring to.”
In the company’s quarterly statement, Lee executives stated progress is being made in the company’s digital transition. Company officials said last quarter that Lee had 450,000 digital-only subscribers and it expects that number to double in four years. Lee reported that its digital ad and subscription revenue grew 17%. However, profit in the three-month period, ended Dec. 26, declined nearly 20% to $13.2 million.
Lee may have recently survived a takeover attempt by hedge fund Alden Global Capital. Last November, Alden made an unsolicited bid to take control of Lee for $24 per share in cash. After Lee rejected the offer, Alden tried to replace some members of the Lee Board of Directors by nominating new directors.
Lee rejected those Alden candidates, and the hedge fund filed a lawsuit against Lee in an attempt to get its candidates placed on the ballot. The lawsuit failed.
On March 10 at Lee’s annual meeting, shareholders overwhelmingly voted to re-elect the company’s three director nominees – Chairman Mary Junck, Lead Independent Director Herb Moloney and CEO Kevin Mowbray.
In the latest development, Cannell Capital and another hedge fund that owns a large stake in Lee, Praetorian Capital, have questioned the amount Lee spent on advisors as it was fending off the $24-per-share takeover offer, according to the financial website StreetInsider.com.
Cannell estimated that Lee spent somewhere between $3 million and $5 million on advice from investment bankers and lawyers during the proxy fight with Alden. Cannell officials said that money could have been better spent in other areas, such as hiring more reporters, according to StreetInsider.com.
Cannell Capital has been prodding Lee to make changes for several years. That includes running a 2019 campaign encouraging shareholders to vote against three board members, including Ms. Junck, according to a Washington Post report.
Lee Enterprises owns 77 daily newspapers across the nation, including the Quad-City Times, The Dispatch-Argus and Muscatine Journal in the Quad Cities region.