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McFeely blog: Bismarck Tribune owner adopts 'poison pill' to slow hostile takeover by hedge fund

Alden Global Capital made bid to buy Lee Enterprises, which owns Bismarck Tribune and about 100 other U.S. newspapers

Lee Enterprises of Davenport, Iowa, owns nearly 100 newspapers in the United States. / Special to InForum
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BISMARCK — In an attempt to protect against a takeover by a New York City hedge fund known for gutting newspapers, the national chain that owns the Bismarck Tribune adopted a so-called "poison pill" plan, according to published reports .

The board of directors of Davenport, Iowa-based Lee Enterprises unanimously voted for what is technically known as a limited-duration shareholder rights plan. More commonly known as a "poison pill," it's a defense strategy used by a targeted firm "to prevent or discourage a potential hostile takeover by an acquiring company," according to the website Investopedia.


  • Hedge fund known for cutting journalism jobs bids for company that owns Bismarck Tribune Lee Enterprises owns nearly 100 newspapers around the country, including The Bismarck Tribune and dozens of others around the Midwest.
  • McFeely: Hedge fund acquiring Bismarck Tribune would be all kinds of bad news for North Dakota Alden Global Capital purchases newspapers and guts them, laying off journalists and squeezing the oxygen out of newsrooms to maximize short-term profits. What's left is a wheezing shell of what once existed.

The tactic is used to make a targeted company less attractive to the potential acquirer.
Alden Global Capital said in a letter to Lee's board last week that it was offering $24 a share , representing a 30% premium over the company's closing stock price the previous Friday.

Alden is a "vulture capitalism" firm that in the last decade has purchased dozens of newspapers and ruthlessly gutted them by cutting staff, selling property and jacking up subscription costs in an effort to maximize short-term profits while ensuring a steadily worsening product and, eventually, the likely closing of the newspaper.


According to an in-depth report in The Atlantic last month , Alden has mastered the profitable dismantling of newspapers.

"The men who devised this model are Randall Smith and Heath Freeman, the co-founders of Alden Global Capital. Since they bought their first newspapers a decade ago, no one has been more mercenary or less interested in pretending to care about their publications' long-term health," The Atlantic reported.

"Researchers at the University of North Carolina found that Alden-owned newspapers have cut their staff at twice the rate of their competitors; not coincidentally, circulation has fallen faster too, according to Ken Doctor, a news-industry analyst who reviewed data from some of the papers," The Atlantic continued. "That might sound like a losing formula, but these papers don’t have to become sustainable businesses for Smith and Freeman to make money.

"With aggressive cost-cutting, Alden can operate its newspapers at a profit for years while turning out a steadily worse product, indifferent to the subscribers it’s alienating. 'It's the meanness and the elegance of the capitalist marketplace brought to newspapers,' Doctor said. So far, Alden has limited its closures primarily to weekly newspapers, but Doctor argues it's only a matter of time before the firm starts shutting down its dailies as well."

Lee Enterprises' plan would go into effect if Alden acquires more than 10% of Lee's stock in the next year. According to news reports, other shareholders at that point could buy shares at a 50% discount or get free shares for every stock they own.

The idea is to dilute the stock, making it more expensive for Alden to acquire a controlling stake. Alden has said it owns 6.1% of Lee's stock already. Alden offered to buy Lee for $141 million, or $24 per share, which is 30% more than the company's stock is worth.

In a statement, Lee's chairman said the board's plan would give it time to consider Alden's proposal "without undue pressure while also safeguarding shareholders' opportunity to realize the long-term value of their investment."

Lee Enterprises dubs itself "a major subscription and advertising platform and a leading provider of local news and information." It owns 77 newspapers in the U.S., including legacy brands like the St. Louis Post-Dispatch, the Omaha World-Herald and the Buffalo News.


Alden has become one of the largest newspaper owners in the country and includes titles such as the Chicago Tribune and Baltimore Sun.

Investopedia says poison pills are not always implemented to stop an acquisition. One may be enacted to get a higher valuation or more favorable terms for the acquisition.

Mike McFeely is a columnist for The Forum of Fargo-Moorhead. He began working for The Forum in the 1980s while he was a student studying journalism at Minnesota State University Moorhead. He's been with The Forum full time since 1990, minus a six-year hiatus when he hosted a local radio talk-show.
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