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Friday, April 07, 2023
The vulture is hungry again: Alden Global Capital wants to buy a few hundred more newspapers (Joshua Benton, Nieman Lab, Harvard, Nevember 22, 2021)
monopolists even worse Gthan GANNETT?
The vulture is hungry again: Alden Global Capital wants to buy a few hundred more newspapers
This time it’s Lee Enterprises in the cross-hairs. Adding it to its empire would leave two American local newspaper giants — Gannett and Alden — and everyone else far behind.
Back in the early 1990s, Dean Singleton predicted that ultimately there would be just three newspaper companies left standing, and he intended his MediaNews Group to be one of them.
It was an audacious prediction, because at the time, after a decade of wheeling, dealing and sometimes ruthless management, MediaNews Group still consisted of just a dozen newspapers, and the company’s board meetings, as he was fond of saying, “could be held in the front seat of a pickup truck.”
But Singleton often repeated his prediction of industry consolidation, and it was the driver behind MediaNews’s growth into the second largest newspaper company (in terms of weekday circulation) over the past 15 years. Today MediaNews has 54 daily newspapers with a total of 2.4 million weekday circulation.
In 2011, MediaNews, like every other American newspaper company, was struggling to recover from the 1-2 of the Internet and the Great Recession, and Singleton was being pushed out of power by investors.
But Martin was smart enough to see what was going on underneath. Now only was Singleton being bumped from the CEO’s office to a figurehead role; board members who’d supported him were also getting the boot — “replaced by new directors representing the stockholders group led by Alden Global Capital, a hedge fund firm which has acquired a large, though not controlling, stake. Several interim executive positions were also filled by people related to Alden or its parent, Smith Management LLC.”
Ah, Alden Global Capital. It’s now known far and wide as the news industry’s ever-more-engorged leech, a cost-cutting omnivore that makes every newsroom it touches worse, King Midas in reverse. But back then, the position Alden had built for itself in newspapers was little appreciated. Martin noted that Alden wasn’t just holding a stake in MediaNews — it owned parts of at least nine different newspaper companies, many of which were in some stage of the bankruptcy process. It was setting itself up for consolidation.
With all these interrelationships among investors and “distressed” newspaper firms, it’s not hard to see why Dean Singleton might say that achieving some kind of “consolidation” will be a full-time job. Still, it seems unlikely that Singleton will get to pull the strings, when the money behind the interlocking investment structures is controlled by billionaire Randall Smith, Alden’s founder, who built his fortune through investments in junk bonds and distressed properties. Alden acquired most of its newspaper stakes through its Alden Global Distressed Opportunities Fund, which it launched in 2008 and which is now worth nearly $3 billion…
Randall Smith, Alden’s CEO, is a shrewder and more sophisticated financial engineer than [ousted MediaNews president Joseph] Lodovic was as Singleton’s second-in-command, and Alden’s ultimate interest is in earning a strong return on its investments, not in the future of journalism, so its strategy is at heart a financial one.And, yes, consolidation will come at the cost of jobs.
A few weeks later, Martin looked more deeply at the various hedge funds and other investment vehicles that owned pieces of the big newspaper companies and concluded that Alden was best positioned to roll up the industry — one whose biggest players at the time included MediaNews, Freedom Communications, Journal-Register Co., Tribune, the Washington Post Co., A.H. Belo, Gannett, Journal Communications, McClatchy, the New York Times Co., E. W. Scripps, Media General, GateHouse Media, Lee Enterprises, and News Corp.
Fast forward a decade to today. Where are all those newspaper companies now?
Set aside, for a moment, the New York Times Co., the Washington Post Co., and News Corp — each of which owns a giant news brand that is fundamentally national and international, not local. They’re in a different business from everyone else. And let’s do the same for the former A. H. Belo, which has stripped itself down to a single paper, The Dallas Morning News. What about the rest?
McClatchy is a special case; Alden tried to buy it out of bankruptcy, but Chatham was its largest creditor and thus had an inside track. (Reminder: Chatham likes to call this moment “late-stage media consolidation,” which means the consolidation has spread all throughout your lymph nodes and it’s time to settle your affairs.)
But other than McClatchy, all of these companies have been sorted into three buckets: two big ones, No. 1 Gannett and No. 2 Alden, and one smaller one, No. 3 Lee Enterprises.
Shares of Lee Enterprises Inc. rose sharply Monday after hedge fund Alden Global Capital LLC offered to buy the newspaper publisher for about $141 million.
Alden, which took Chicago-based newspaper chain Tribune Publishing private in May, said it made a proposal to buy Lee for $24 a share in cash, a 30% premium to Friday’s closing price for the Davenport, Iowa, company.
Alden, which already owns 6% of Lee through an affiliate, said it has the ability to fully finance the all-cash proposal, and that it doesn’t expect a deal would raise any material regulatory issues.
Based on last year’s circulation numbers, a combined Alden+Lee would sell 7.627 million copies a day, behind only Gannett’s 8.596 million. They’d both be far ahead of the new No. 3, McClatchy, which is way back at 1.747 million.
You can read the offer letter Alden sent Lee’s board here. It hits the same notes that nocturnal Alden usually does in its rare visits to the sunlit world: “Alden Global Capital, LLC is a significant investor in American newspapers,” “committed to ensuring communities nationwide have access to robust, independently minded local journalism,” “a reaffirmation of our substantial commitment to the newspaper industry,” “scale is critical for newspapers to ensure necessary staffing and in order to thrive in this challenging environment,” blah, blah, blah.
But frankly, I’d be surprised if Lee put up much of a fight this time. Financing was a major question in the Gannett push; Alden is offering to pay cash here. The Tribune deal took place over in multiple stages over a longer period of time, giving opponents time to strategize; here, Alden says they want to have it all wrapped up “in approximately four weeks.”
And frankly, Tribune owned papers in big metros like New York, Chicago, Baltimore, Orlando, and South Florida, the sort of places where you can rev up some media attention. Lee’s biggest papers are in St. Louis, Omaha, Tulsa, and Buffalo. Its headquarters are in a suburban office park in Davenport, Iowa; Tribune Tower this ain’t. And, at least at this writing, Lee isn’t pushing back against Alden. It’s notcommenting to media reporters, whereas Gannett was cranky from the jump.
There are still some other chains to be had, of course. Advance is still out there, should the Newhouses ever grow itchy. Hearst still has a few big metros, though newspapers are a declining part of their business. Ogden is Lee-like in a number of ways. And the newspaper business is still much more decentralized than many American industries, with hundreds of papers still owned as single units — in the lucky places, still by families with a connection to and investment in the community.
But it’s as clear as ever that Dean Singleton was thinking in the right direction back in the early 1990s. He thought there would be just three newspaper companies left standing, and he wanted MediaNews to be one of them. After this deal — and whatever aftershocks follow it, as the boards of smaller chains see themselves on the outside of a two-horse race — we’ll be left with Gannett, Alden Global Capital, and then everybody else.