Activist investor seeks to remove three from Lee Enterprises' board, including chairman and CEO

A Wyoming-based activist investor – who has publicly feuded with James Cramer of CNBC's "Mad Money" – wants Lee Enterprises, Inc. shareholders to replace three members of the Davenport media company's board of directors, including chairman Mary Junck and President/CEO Kevin Mowbray.

J. Caro Cannell in a filing Wednesday (1/16/19) with the Security and Exchange Commission (SEC) labeled the Lee board "stale, lethargic and devoid of any skin in the game." He urged shareholders not to re-elect Junck, Mowbray and board member Herbert W. Maloney III at the upcoming Lee annual meeting in February. Lee owns 46 daily newspapers, including the QC Times and the Dispatch/Argus.

"As one of the largest shareholders of Lee Enterprises, Inc., Cannell Capital LLC has been spending its own money to help all the company’s injured shareholders," Cannell wrote in the letter to the shareholders filed with the SEC. "Cannell Capital owns Lee because we think that great value lies within, value which can be unlocked through (t)he introduction of new stewards of shareholders."

Cannell promised in the letter to release additional "facts" about the "board intransigent" in the coming weeks prior to the annual shareholders' meeting.

According to the SEC filing, Cannell controlled funds have 2.73 million shares (4.8 percent) of Lee stock. Last month alone, Cannell acquired 348,000 shares in Lee.

Lee stock jumped 33 cents per share (14 percent) to $2.65 a share Wednesday afternoon before closing at $2.52 a share.

Having been notified by Cannell of its intent to oppose re-election of the three board members, Lee included a lengthy recitation of company emails, telephone calls and video meetings between Lee executives and Cannell and his associates dating back to August of last year.


From the proxy sent Lee to shareholders January 11, here's the company's perspective of the discussions between Lee and Cannell:

"From time to time between September 2017 and January 2019, J. Carlo Cannell, managing member of Cannell Capital LLC (“Cannell Capital”), and Oleg Karmanov, a research analyst at Cannell Capital, exchanged emails and spoke telephonically and by video conference with representatives of the Company and the Board, including, at different times, Mary Junck, the Company’s executive chairman, Kevin Mowbray, the Company’s president and chief executive officer, Tim Millage, the Company’s chief financial officer, and Herb Moloney, the Company’s lead independent director. During these calls, the Company and board representatives discussed the Company’s operations and strategy and addressed certain questions and views communicated by Mr. Cannell and Mr. Karmanov.

"As part of the Company’s ongoing engagement with its investors, Mr. Millage regularly speaks with investors and potential investors to provide updates on the Company’s business and to answer any questions. As part of this regular outreach, on August 6, 2018, Mr. Millage called Mr. Cannell to provide an update on the business. During this call, Mr. Cannell expressed views about management compensation and the state of the newspaper industry generally.

"On each of August 23 and 24, 2018, Mr. Cannell emailed Mr. Millage with observations about management compensation and requested a meeting with an independent member of the Board.

"On August 27, 2018, Mr. Cannell and Mr. Millage held a telephone call during which Mr. Cannell discussed his views on management compensation and the role of the executive chairman.

"On September 7, 2018, at the request of Mr. Cannell, Mr. Cannell and Mr. Moloney held a telephone call during which Mr. Cannell expressed observations about the role of the executive chairman, the growth of the Company’s digital media business, and compensation levels for management and directors. Mr. Moloney told Mr. Cannell that he would discuss these observations with the other independent directors and reply with suggested dates for a follow-up discussion.

"On September 13, 2018, the time period for shareholders to submit director nominations for the 2019 annual meeting pursuant to the Company’s bylaws, as disclosed on January 12, 2018 in the Company’s proxy statement for its 2018 annual meeting, expired.

"Between September 19 and September 24, 2018, representatives of the Company sent Mr. Cannell multiple potential dates and times for an in-person meeting in late September or October 2018. Mr. Cannell declined all such dates and times and replied that scheduling a meeting was no longer a priority as Mr. Moloney had previously answered his questions.

"On September 20, 2018, during a regularly scheduled meeting, the Board discussed the Company's prior interactions with Mr. Cannell.

"On October 19, 2019, following a subsequent request by Mr. Cannell on October 5, 2018, Ms. Junck, Mr. Mowbray and Mr. Millage held a video conference with Mr. Cannell and Mr. Karmanov to discuss the Company’s digital media strategy. The day before the meeting, Mr. Millage emailed Mr. Cannell with responses to certain questions that Mr. Cannell had submitted on October 16, 2018.

"On October 24, 2018, Mr. Moloney and Mr. Cannell held a telephone call during which Mr. Cannell discussed his views of the executive chairman role, how to monetize the Company’s digital media business, and the composition of the Board. During the call, Mr. Cannell stated that he was considering voting against the Company’s director nominees for the 2019 annual meeting. Mr. Cannell also stated that although he did not have a specific candidate in mind, he would like the Board to add a director with a strong background in digital media, and requested to speak with the person responsible for selecting new Board members.

"On November 13, 2018, Stephen Wagstaff, the chief financial officer of Cannell Capital, sent a letter to the Company with information about an individual that Mr. Cannell was considering submitting as a potential director candidate.

"On November 21, 2018, as part of its ongoing efforts to recruit qualified candidates for the Board, the Company obtained a proposal from, and subsequently engaged, a director search firm to assist the Board in identifying potential new directors.

"On December 3, 2018, Mr. Moloney and Mr. Cannell held a telephone call during which Mr. Cannell provided additional views on the current composition of the Company’s Board. Mr. Cannell had sent biographical information about two potential director candidates in advance of the call. During the call, Mr. Cannell told Mr. Moloney that a third person was dialed into the call whom Mr. Cannell introduced as another potential director candidate. Mr. Cannell noted that he may decide to launch a public website if the Company failed to nominate Mr. Cannell’s candidates to the Board, and suggested the possibility of entering into a standstill agreement with Cannell Capital in exchange for nominating one of Mr. Cannell’s candidates. Mr. Moloney told Mr. Cannell that the Company had already engaged a director search firm and that he would send Mr. Cannell their contact information.

"On December 6, 2018, during a regularly scheduled meeting, the Board discussed the Company's interactions with Mr. Cannell since the September 20 Board meeting.

"On December 17, 2018, following an introduction by Mr. Moloney, Mr. Cannell held a telephone call with the Company’s director search firm during which Mr. Cannell submitted biographical information for six director candidates. Three of the director candidates were identified by code name only. The representative of the director search firm noted that Mr. Cannell’s suggestions would be reviewed with the Company’s Nominating and Corporate Governance Committee ("NCGC") along with other potential candidates in connection with the ongoing director search process.

"On December 20, 2018, Mr. Karmanov called Mr. Millage to discuss the Company’s amendment to its First Lien Credit Agreement.

"On December 27, 2018, Cannell Capital, on behalf of its investment vehicles, made a Schedule 13D filing with the SEC disclosing beneficial ownership of approximately 4.22% of the Company’s Common Stock and indicating that Cannell Capital may pursue activities having the purpose or effect of changing or influencing the control of the Company. The Schedule 13D attached a written statement from Cannell Capital identifying what Cannell Capital described as problems with the current Board, including the directors’ perceived lack of “skin in the game”, relevant experience for the changes required to adapt to secular shifts in newspapers, and capital markets knowledge. The written statement also noted that Cannell Capital had identified six potential director candidates, three of whom had not yet consented to be included as candidates.

"On December 28, 2019, Mr. Cannell’s assistant emailed Dr. Richard Cole, Chairman of the NCGC, requesting a telephone call between Mr. Cannell and Dr. Cole to discuss potential director candidates. The call has been scheduled for January 24, 2019. Mr. Moloney also intends to join that call.

"On January 2, 2019, Mr. Karmanov emailed Mr. Millage requesting a telephone call between Mr. Millage, Mr. Cannell and Mr. Karmanov to discuss the Company’s fourth quarter and year-end results. A call was scheduled for January 9, 2019.

"On January 4, 2019, Mr. Wagstaff sent a letter to Dr. Cole, purporting to announce a “vote no” campaign in which Cannell Capital will advise all Company shareholders to withhold votes from all Board members at the 2019 annual meeting. Mr. Wagstaff also sent Dr. Cole a draft appointment and standstill agreement proposing that, in exchange for Cannell Capital ending this “vote no” campaign, two of the Company’s current directors would resign and two of Cannell Capital’s director candidates would be appointed to the Board and submitted to shareholders for re-election at the 2019 annual meeting. Cannell Capital also enclosed biographical information for the six previously-identified director candidates, two of whom were still identified by code name only.

"On January 7, 2019, Ms. Junck sent a letter to Mr. Cannell in response to Mr. Cannell’s letter dated January 4 and his submission of potential candidates for the Board. In the letter, Ms. Junck noted that the Company’s Board and management team have been and continue to be open to Mr. Cannell’s perspectives on the Company, that the NCGC will carefully evaluate Mr. Cannell’s candidates for future consideration as it would any other director candidates, and that Mr. Cannell will have the opportunity to discuss his proposed candidates during the upcoming telephone call with Dr. Cole on January 24, which Mr. Moloney also intends to join.

"On January 9, 2019, as requested by Mr. Karmanov, Mr. Karmanov and Mr. Millage held a telephone call during which Mr. Millage responded to questions from Mr. Karmanov regarding the Company’s fourth quarter and year-end results and its operations and strategy. Mr. Cannell was scheduled to join the call but did not attend."


Back in December 2014, Cannell criticized CNBC's Cramer over his compensation from TheStreet, a firm Cramer helped found. For more on that issue, CLICK HERE.

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