In a significant development, Lee Enterprises announced on Tuesday a strategic agreement with billionaire investor David Hoffmann. This deal, which includes a substantial $50 million investment, aims to bolster the financial stability of the nation’s third-largest newspaper chain and position it for future growth.
David Hoffmann, whose family investment firm already boasts ownership of over 40 publications, is set to become the chairman of Lee Enterprises. Hoffmann, who is ambitiously working to become the leading newspaper publisher in the U.S., believes that newspapers still have a vital role in covering local communities. He envisions a thriving digital subscription business model supporting this mission.
As part of this transition, Lee Enterprises announced that CEO Kevin Mowbray will retire after an impressive 39-year tenure with the company. Headquartered in Davenport, Iowa, Lee owns several significant publications such as the St. Louis Post-Dispatch, Buffalo News, and Omaha World-Herald, operating across 25 states.
Hoffmann expressed his vision for Lee Enterprises with a focus on “disciplined execution and long-term value creation,” though he chose not to elaborate further on the specifics of the agreement.
Hoffmann initially built his wealth through DHR Global, an executive search firm he founded. His investment fund has since grown to encompass more than 125 brands, employing 22,000 people, and is anticipated to take a controlling interest in the Pittsburgh Penguins next year.
According to Tim Franklin, a professor and chair of local news at Northwestern University’s Medill School of Journalism, the true test for Hoffmann will be whether he follows through on his plans to reinvest in newsrooms. This reinvestment is essential for strengthening local coverage, including high school sports and other community institutions.
In recent years Lee — like many news companies — has cut staff and sold off some of the real estate its newspapers own as advertising and website traffic declined. Many Lee publications also stopped printing on Mondays.
The company also struggled with $455.5 million of debt taken on when it bought Warren Buffett’s newspapers from Berkshire Hathaway and refinanced its existing debt. Lee said the new infusion from Hoffmann and other investors will allow it to reduce the interest rate on that debt from 9% to 5% and to save about $18 million a year.
“Lee’s back was up against the wall. And I think it was looking for a way to stabilize the business,” Franklin said.
Buffett and incoming Berkshire CEO Greg Abel did not respond to questions Tuesday, but before selling off Berkshire’s newspapers, Buffett concluded the industry was “toast” and destined for an unending decline.
Unlike when Lee fought off a takeover bid from the Alden Global hedge fund three years ago, the publisher’s board has embraced Hoffmann’s approach.
Hoffmann agreed to buy $35 million of new Lee stock at $3.25 per share to go along with the 9.8% of the company’s stock he already controlled. Other investors will put up $15 million.
Lee shares soared more than 20% Tuesday to close at $4.50 after the news was announced.
“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,” Franklin said.
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