Warren Buffett sells his newspaper businesses for $140 million

Berkshire Hathaway Inc said Wednesday that it is selling its newspaper business to Lee Enterprises Inc, thereby ditching an industry that the billionaire investor has long supported and defended despite its deteriorating financial outlook..

Lee Enterprises will pay $ 140 million in cash for 30 daily newspapers, including the Omaha World-Herald and Buffalo News, and several dozen weekly publications and other products owned by the BH Media Group..

Lee Enterprises in Davenport, Iowa already owns outlets such as «St. Louis Post-Dispatcher» (St. Louis Post-Dispatch) and «Bismarck Tribune» (The Bismarck Tribune) in North Dakota.

In a statement released alongside Lee’s statement, Buffett said: «My partner Charlie Munger and I have known and admired Lee for over 40 years. They have achieved exceptional results in managing BH Media newspapers and continue to outperform the industry in digital market share and revenue.».

«We had no interest in selling the group to anyone else for one simple reason: We believe Lee is best at handling the challenges of the industry.», – he added.

«These close partnerships have resulted in increased digital and subscriber revenues, increased profits, and continuous innovation.», – Lee CEO Kevin Mowbray said in a press release.

The deal expands Lee Enterprises’ portfolio from 50 daily newspapers to 81, and nearly doubles its audience. The company expects these acquisitions to increase revenue by 87% and adjusted earnings by 40%. It is estimated that the annual income and synergies from the transaction will range from $ 20 to $ 25 million.

As part of the sale, Berkshire will provide Lee $ 576 million in long-term funding at 9% per annum, which will allow the publisher to pay off its existing debts and save about $ 5 million per year..

Lee’s shares soared 58% in pre-sale on Wednesday, adding about $ 42 million to the company’s market cap..

Although newspapers represented only a small fraction of Berkshire, which acquired most of its assets over the past decade, it is very unusual for Buffett to sell the entire business in its entirety..

Warren Buffett bought «Buffalo News» for about $ 36 million in 1977, and added 28 more daily newspapers to Berkshire in the early 2010s. While he was concerned about declining circulation and advertising revenues, he defended newspapers as a sound investment at the time..

Warren Buffett's Berkshire Hathaway Sells Its Newspaper Business For $ 140 Million

«Charlie and I believe that newspapers that provide comprehensive and reliable information for tightly connected communities and have a sound internet strategy will remain viable for a long time.», – wrote Buffett in his letter to shareholders in 2012.

At the 2018 AGM, Buffett admitted that newspapers were disappointing but downplayed..

«We bought all the papers at reasonable prices», – he said. «This is not a big economic impact on Berkshire.».

Buffett’s lifelong love of newspapers may have distorted his view of the industry. 

Buffett, who worked as a newspaper delivery man as a teenager, long lamented the industry’s downturn, telling Berkshire shareholders in May 2018 that only the Wall Street Journal, the New York Times, and possibly the Washington Post had found digital models strong enough to make up for declining earnings. from advertising in print media.

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