Daily Bread for 11.24.21: Alden Global Capital Comes for Lee Newspapers

Good morning.

Wednesday in Whitewater will be cloudy with a high of 50.  Sunrise is 6:59 AM and sunset 4:24 PM for 9h 25m 26s of daytime.  The moon is a waning gibbous with 78.2% of its visible disk illuminated.

 On this day in 1863, at the Battle of Lookout Mountain near Chattanooga, Union forces under General Ulysses S. Grant capture Lookout Mountain and begin to break the Confederate siege of the city.

 Erik Gunn reports ‘Slash and burn’ hedge fund bids for owner of multiple Wisconsin newspapers:

A hedge fund that has cut staff and resources drastically while becoming the second largest owner of newspapers in the country is now bidding to buy Lee Enterprises, which owns several daily newspapers in Wisconsin.

Alden Global Capital is offering $24 a share for Lee, the investment firm stated in a letter to Lee’s board of directors Monday, which would value the company at about $141 million. The offer is a 30% premium over Lee’s share price as of the close of trading on Friday, Nov. 19.

Word of the proposal quickly sent Lee’s stock price to near the offering amount by noon on Monday. The publishing company did not have an immediate comment.

Lee papers in Wisconsin include its state flagship, the Wisconsin State Journal, as well as dailies in La Crosse, Racine and Kenosha. Lee owns 90 newspapers nationwide, including the St. Louis Post-Dispatch, the Buffalo News and the Omaha World-Herald.

Over the last decade, Alden Global Capital has been buying newspapers around the country, including the chains Media General and the Tribune Co. It now owns about 200 papers, according to published reports.

“Alden comes in and it slashes and it burns,” said Lewis Friedland, a University of Wisconsin journalism professor. “They’re basically strip-mining newspapers.”

In this October’s Atlantic, McKay Coppins exhaustively described Alden’s approach in A Secretive Hedge Fund is Gutting Newsrooms:

What threatens local newspapers now is not just digital disruption or abstract market forces. They’re being targeted by investors who have figured out how to get rich by strip-mining local-news outfits. The model is simple: Gut the staff, sell the real estatejack up subscription prices, and wring as much cash as possible out of the enterprise until eventually enough readers cancel their subscriptions that the paper folds, or is reduced to a desiccated husk of its former self.

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. 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. 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.


This investment strategy does not come without social consequences. When a local newspaper vanishes, research shows, it tends to correspond with lower voter turnout, increased polarization, and a general erosion of civic engagementMisinformation proliferates. City budgets balloon, along with corruption and dysfunction. The consequences can influence national politics as well; an analysis by Politico found that Donald Trump performed best during the 2016 election in places with limited access to local news.

With its acquisition of Tribune Publishing earlier this year, Alden now controls more than 200 newspapers, including some of the country’s most famous and influential: the Chicago TribuneThe Baltimore Sun, the New York Daily News. It is the nation’s second-largest newspaper owner by circulation. Some in the industry say they wouldn’t be surprised if Smith and Freeman end up becoming the biggest newspaper moguls in U.S. history.

More than a few Wisconsin communities are effectively news deserts already, and others have local papers little better than an Alden paper. (The Janesville Gazette and Daily Jefferson County Union, now owned by APG, look like nothing so much as third-tier ad sales networks masquerading as proper newspapers.)

I’ve long been a critical of local newspapers because local newspapers long ago abandoned inquisitive and insightful reporting for boosterism and glad-handing. Alden and APG are bad for the communities in which they operate, but homegrown publishers were bad for these communities long before Alden and APG scooped desiccated local papers off the remainders table.

Alden, if successful in this acquisition, will take Wisconsin and other states yet lower.

One Hedge Fund Guts Local Newsrooms:

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