A shareholder suit is seeking information on whether a low-profile investment company that has snapped up newspapers around the country is providing sufficient information.
The suit was filed this weak in Delaware Chancery Court by Sola Ltd. and Ultra Master Ltd. against MediaNews Group, Inc. and the company’s controlling stockholder, Alden Global Capital LLC.
NewsMedia Group and Alden own well-known dailies such as the Denver Post, Orange County Register and San Jose Mercury-News. The company also owns The Daily Local News, West Chester, PA as well as other papers around Philadelphia.
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The suit seeks access to NewsMedia records, a common demand in many Chancery Court cases.
While Alden is the controlling stockholder, Sola and Ultra Master stated that the two entities own nearly a quarter of the stock in MediaNews.
In the filing, Sola claimed it is “has reasonable cause to believe that there has been a fundamental change in the Company’s business. This suspicion is informed by a series of insider transactions involving Alden and the Company; investments by the Company that has no relationship to its media business; and, most recently, the creation by the Company of a new investment-company subsidiary.”
The plaintiffs also pointed to the possibility that funds were diverted to Alden’s investment in Fred’s, a southern drugstore chain whose plans to buy a large chunk of Rite-Aid store locations from Walgreens fell through. Stock in Fred’s has since fallen.
Walgreens later agreed to sell the locations to grocery giant Albertson’s.
Sola also stated that it has not seen financial reports from MMG since last year. The filing stated that the company sought the reports before filing in Chancery Court.
Alden’s investments in newspapers have been controversial, with critics claiming that the company slashes costs, fires news staff and sharply reduces community coverage, while its investment chief lives a lavish lifestyle.
The company maintains an extremely low profile with its website consisting of a client login and no additional information on its holdings.
A New York law firm and Wilmington-based Richards, Layton & Finger serve as counsel for Sola.
