At a Glance
- David Hoffmann will take over Lee Enterprises with a $50 M investment.
- CEO Kevin Mowbray will retire after 39 years.
- Shares surged over 20 % to close at $4.50.
- Why it matters: The deal could reshape the future of local newspapers and stabilize a company burdened by debt.
On Tuesday, Lee Enterprises announced a deal with billionaire investor David Hoffmann that could reshape the future of local newspapers. Hoffmann will become chairman and inject $50 M to help the company reduce debt and invest in newsroom coverage.
Leadership Change
Hoffmann will become Lee’s chairman as CEO Kevin Mowbray retires after nearly four decades. Lee owns the St. Louis Post-Dispatch, Buffalo News, Omaha World-Herald and dozens of other papers across 25 states.
David Hoffmann stated:
> “With improved financial stability and a clear governance framework in place, the focus can now be on disciplined execution and long-term value creation.”
He built his fortune through DHR Global and now runs an investment fund that owns over 125 brands and 22,000 employees, and will become controlling owner of the Pittsburgh Penguins next year.
Financial Boost
Lee’s debt of $455.5 M, taken on when it bought Warren Buffett’s newspapers, will see its interest rate cut from 9 % to 5 %, saving about $18 M a year.
| Debt | Interest Rate Before | Interest Rate After | Savings per year |
|---|---|---|---|
| $455.5 M | 9 % | 5 % | $18 M |
The $50 M infusion comes from Hoffmann’s $35 M new stock purchase at $3.25 per share plus $15 M from other investors.
- Hoffmann (new stock) – $35 M
- Other investors – $15 M
- Total new investment – $50 M
Looking Ahead
A key test will be whether Hoffmann and Lee reinvest in newsrooms to strengthen coverage of high school sports and local institutions, as noted by Tim Franklin, professor at Northwestern University.
Franklin warned that Lee had been forced to cut staff, sell real-estate, and stop Monday printing as traffic fell.
Tim Franklin said:
> “Lee’s back was up against the wall. And I think it was looking for a way to stabilize the business.”
Another concern is whether the new owner will commit to original local reporting that drives digital subscriptions, Franklin added.
Tim Franklin said:
> “The question is going to be, is Hoffmann going to make that investment in original unique local reporting that will drive digital subscriptions, which he seems to believe is a cornerstone of his business model.”
The board’s acceptance of Hoffmann’s approach contrasts with the 2019 Alden Global Capital takeover fight.
Shares rose over 20 % to close at $4.50 after the announcement.
Key Takeaways
- Hoffmann will lead Lee with a $50 M investment and a new board role.
- Debt interest will drop from 9 % to 5 %, saving $18 M annually.
- Success hinges on reinvestment in local news and digital subscription growth.
The deal marks a pivotal moment for Lee Enterprises as it seeks to stabilize finances and revive local journalism.
