With plans to own more shares of Tribune by January, hedge fund says the relationship between two chains is “deepening”

By Julie Reynolds

In an abrupt strategy change, hedge fund Alden Global Capital appears committed to staying in the news business, after the pandemic created an unexpected new profit stream, internal company reports show.

The reports, which describe the financial picture of the Alden-owned newspaper chain MNG Enterprises, were obtained by DFMworkers.org after they were distributed at an internal staff meeting last month.

Besides recording the pandemic-inspired shift in strategy, the documents show Alden now plans to move quickly to acquire a greater stake in Chicago-based Tribune Publishing.

Alden has earned a damning reputation for stripping its MNG Enterprises newspaper chain of cash, staff and assets, and is widely feared as a poacher of news chains to be used for potential “cash extraction.”

Its latest target is Tribune Publishing, which owns the Chicago Tribune, New York Daily News, Hartford Courant, The Virginian-Pilot, Allentown Morning Call, Virginia’s Daily Press, and Orlando Sentinel, among other papers. Alden now owns nearly a third of the company and its hand-picked directors hold three of Tribune’s seven board seats. One is held by Alden’s patriarch and founder, Randall Smith.

Tribune employees and others worried about Alden’s influence thought they had until July 2021 to worry about Alden getting a bigger chunk of the company, thanks to a “standstill agreement” that Alden recently signed.

Despite the agreement, a presentation slide titled “Important company updates” from the MNG meeting shows Alden’s timeline has accelerated.

“Tribune relationship deepening with Randy Smith on their board,” the slide reads. “Greater ownership could happen as soon as Jan 1. Pushing our strategies closer together.”

Although Alden agreed not to purchase more Tribune shares before July 31, the agreement has a number of loopholes that would still allow Alden to merge with Tribune or even take over ownership before then.

The description of the “deepening relationship” with Tribune contradicts recent statements made by Alden president Heath Freeman, in which he told Illinois Sens. Dick Durbin and Tammy Duckworth that Alden did not control Tribune’s business decisions.

“It is critical to underscore that Tribune operates independently. As a result, Alden does not, and cannot, make decisions regarding operations, selling assets, influencing newspaper portfolios, staffing, or facilities for Tribune,” Freeman told the senators in an April letter. “These decisions are made solely by Tribune. At this time, Alden has not made any decision regarding additional investments in Tribune.”

The new internal reports make clear that Alden does indeed have its sight on controlling Tribune.

The reports did not say what form MNG’s “greater ownership” of Tribune might take, or whether the two companies would merge.

The acceleration of its plans to take over Tribune might also be connected to what the company documents call an “important strategic shift” to focus on digital subscription revenue after years of gutting MNG print newsrooms.


Presentation slide describing MNG/Alden’s shift in strategy

Pandemic brings a change in fortunes

As a self-proclaimed investor in “distress,” vulture hedge funds like Alden are known for sniffing out troubled companies to acquire at a discount. Alden also has a history of profiting from international crises, such as economic collapse in Greece and Argentina.

But now Alden is learning to profit from the disasters affecting its own readers.

Eerily, in July it predicted increased page views because “wildfire season in California is also expected to lead to increased traffic in the coming months, as it has in recent years.” That expectation came to fruition in August as wildfires ravaged the West.

Even more important, though, was the COVID-19 pandemic, which sent online subscriptions soaring.

The decision for the strategy shift was made in August, with MNG declaring its new mission to become a “consumer revenue digital subscriptions business.”

The reports show that immediate changes were set to take place in late August, and include “redoing our budgeted metrics in support of this strategy.”

The documents also said that digital subscriptions will allow MNG to reach a break-even point in less than two years, when digital subscription revenue will “overtake” the pandemic-induced loss in advertising income.

“Most of the footprint’s top stories in July were from clusters that continue to see growth, with many top articles related to the ongoing economic impacts of coronavirus,” an “audience report” from the meeting said.

Yet the public only saw alarming cuts caused by the pandemic and economic shutdown. The start of the pandemic spawned quick and massive furloughs across the MNG chain as fears of lost advertising revenue loomed.

But in fact, the expected devastating losses have been partly offset by huge jumps in digital subscriptions, and the company expects the increase will make up for losses from print ad revenue in less than two years.

Website impressions jumped from 718 million in February to 1.3 billion in March as the pandemic took hold and readers looked online for life-saving information.


Alden’s sudden interest in looking at a two-year time frame is a new twist in its playbook, which typically involves buying distressed companies, cutting costs, selling off their assets and then quickly moving on, often after declaring bankruptcy. The turnaround time in these scenarios has been swift. Alden’s investment in the Fred’s pharmacy chain stretched two years from acquisition to liquidation. It took less than two years to do the same to Payless ShoeSource.

Until now, Alden appeared to be following the same script with its newspapers. Media analyst Ken Doctor told me in 2018 that MNG bean-counters had calculated the company’s milk-it-till-it’s-dry strategy would likely run its course by the three-year mark, at which point Alden would sell whatever’s left of its papers.

The three-year mark comes early next year. But this year, the pandemic seemed to speed up the timeline. News of layoffs and unpaid furloughs at the Denver Post, the (San Jose) Mercury News and other MNG newspapers rippled across the country in early April, even as newsrooms noted dramatic leaps in online readership due to coverage of the coronavirus pandemic.

Tribune soon followed, with mass unpaid furloughs across its papers even though it had paid $9 million in shareholder dividends in March.

“We have members who are selling plasma to help pay for their groceries and their bills,” Tidewater Guild president Sara Gregory told NPR at the time.

Tribune even stopped paying its newspapers’ rent in April, a year after Alden had tested the concept of shutting down several newsrooms to save money. Now the Alden-influenced Tribune is embracing that path wholeheartedly, and in August, Tribune abruptly shuttered newsrooms and offices at five papers. By the end of June, Tribune had negotiated changes to 13 lease agreements.

MNG’s projections show increasing revenue after initial declines.

As all this took place, not everyone bought the company line. “For a company known for its drastic cost-cutting measures, we wonder if the coronavirus crisis is just a convenient excuse to justify their actions,” wrote Dana E. Neuts for Subscription Insider.

But by April, the financial future had quietly turned around for Alden. Subscriptions were just a part of the improvement. Growth in online advertising revenue, measured as “effective cost per mille,” or eCPM, was also growing.

“Clusters across the footprint continue to see strong growth in users, with a 15% increase from July 2019,” one company report for July 2020 says. “Although eCPM has not fully recovered from the impacts of COVID, overall eCPM continues to show monthly improvement, growing 12% from June to July, signaling that advertisers continue to gain confidence in the market.”

This boom did dip a bit in July, the report noted, though the company added confidently: “This is not expected to continue, however, as forecasts indicate monthly revenue growth through the end of the year.”

Overall, the reports paint a sunny picture. Website impressions jumped from 718 million in February to 1.3 billion in March as the pandemic took hold and readers looked online for life-saving information.

Although overall online revenue was down in April by 25 percent over last year, the percentage drop-off shrank as summer loomed. By July the difference compared to 2019 was only 11 percent and shrinking.

MNG has not publicly acknowledged its shift toward becoming “a consumer revenue digital subscriptions business,” but new tactics to support the shift are in place, including “locking” online readers out after fewer articles in order to encourage subscriptions.

By August, the company reported internally that strategic changes were “taking effect over next few weeks,” and that the company was “redoing our budgeted metrics in support of this strategy.”

So far, there’s no evidence that MNG plans to invest future profits back in its news products.

Clearly, digital revenues can’t keep rising indefinitely without also increasing newsroom staffing levels. The company continues to cut editorial positions and uses furloughs to manage cash flow, which means the amount of original content in Alden-controlled papers will surely shrink. As media scholar Penny Muse Abernathy observed, “the loss of journalists always results in a loss of journalism, as editors have to make hard decisions about which stories to cover and which to ignore.”

None of this bodes well for Tribune as Alden “deepens its relationship.”