Davenport-based newspaper publisher Lee Enterprises is looking to raise up to $50 million to support the company’s planned digital transformation.
Lee on Monday, 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.
“In connection with the proposed rights offering, we have an agreement in-principle with our term loan lender that, if we successfully raise the full offering amount of $50 million, we will receive a reduction in our annual interest rate from 9% to 5% for five years, resulting in interest savings of approximately $18 million annually and up to $90 million over the five-year period,” according to a company’s release.
In its recent quarterly statements, Lee Enterprises has touted its transformation from print products to digital.
In the company’s most recent quarterly report, it said that digital subscription revenue continues to grow, up 16% in the quarter, as Lee yields higher average digital subscription rates for its 670,000 digital-only subscribers.
“Our third quarter results mark significant progress in our transformation strategy,” President and CEO Kevin Mowbray said in the release. “By rigorously managing our operating expenses and continuing to grow our digital business, we are driving sustainable improvements in profitability.”
In the Quad Cities region, Lee is the publisher of the Quad-City Times, The Dispatch and Rock Island Argus, and Muscatine Journal newspapers. It publishes more than 70 daily papers and 350 weekly and specialty publications serving 73 markets in 26 U.S. states.
The money raised from this week’s proposed rights offering will be used for working capital and other activities necessary for the company’s operations, such as investments in technology with respect to advertising strategies, audience outreach and digital products, the release added.
Lee Enterprises also is seeking stockholder consent to amend its charter to provide for authorization of additional shares of its existing common stock.
In the proposed rights offering, holders of the company’s voting common stock will receive subscription rights that will consist of one basic subscription right and an over-subscription privilege.
Each basic subscription right will entitle a holder to purchase a fixed number of shares of voting common stock at a to-be-determined subscription price.
Holders that elect to fully subscribe to their basic subscription rights will be entitled to an over-subscription privilege that will allow such holders to elect to subscribe for additional shares of the company’s common stock at the subscription price. Participants in the over-subscription will have the option to elect to receive either voting common stock or non-voting common stock, according to the release.
