Berkshire Hathaway, the conglomerate run by Warren E. Buffett, announced Wednesday that it had agreed to sell its 31 newspapers for $140 million in cash.
The buyer is Lee Enterprises, the publisher that has been managing the newspaper group's operations for the past 18 months.
The deal covers 31 daily newspapers in 10 states as well as 49 paid weekly publications with digital sites and 32 other print products. Other newspapers include the Tulsa World , the Richmond Times-Dispatch in Virginia, the Winston-Salem Journal in North Carolina and The Buffalo News in New York.
The deal ends Buffett's dalliance with being a news mogul. Berkshire had owned The Buffalo News since 1977 and within the past decade rapidly bought up other papers, consolidating them in a division called BH Media Group.
In a letter to his newspaper publishers in 2012, Buffett described himself as a newspaper "addict" with designs on buying more papers.
But Buffett grew pessimistic about the business more recently because of drops in advertising revenue. Buffett, who got a job delivering papers as a teenager and invested in the industry to capitalize on its one-time local advertising stronghold, lamented last year that most newspapers are "toast."
Lee also owns newspapers in St. Louis; Tucson, Ariz.a; and other markets.
The deal will increase Lee's size significantly. The cmpany said that its portfolio will grow to 81 daily papers and nearly double its audience size. The deal is expected to close in mid-March.
"This is a compelling and transformative transaction for Lee," said Mary Junck, Lee's chairman. "It both refinances our long-term debt on attractive terms and provides new revenue opportunities as well as operational synergies across an expanded portfolio."
Buffett, Berkshire's chairman and chief executive officer, said he and his partner, Charlie Munger, have long admired Lee.
"We had zero interest in selling the group to anyone else for one simple reason: We believe that Lee is best positioned to manage through the industry's challenges," Buffett said in a statement.
Berkshire Hathaway is providing about $576 million in long-term, 9% financing to Lee, which it will use to pay for the Berkshire properties and refinance Lee's approximately $400 million in existing debt. Berkshire will be Lee's sole lender after the deal closes.
Lee said it expects to eliminate about $20 million in annual costs as part of the deal primarily by cutting administrative expenses at the newspapers. Lee said that it also expects to increase revenue by about $5 million by focusing on increasing digital revenue and changes to subscription pricing.
It also plans to enter into a 10-year lease agreement for BH Media's real estate. The real estate of other papers has become a major target for hedge funds such as Alden Global Capital, which have made a business out of buying struggling papers and slashing staffs to maximize profits and take advantage of their assets. Alden owns the nation's second-largest newspaper chain, Digital First Media, and has overseen drastic cost-cutting at 100 daily papers, causing more than 1,000 jobs to be lost. In a 2018 court case, Alden disclosed that it has affiliated real estate companies whose business is focused primarily on efficiently buying, selling, leasing and redeveloping newspapers' offices and printing plants.
The sale is a rare move for Berkshire as Buffett has long said that he prefers to hold on to businesses. The newspaper deal, however, is Berkshire's second divestiture in less than a year, including the sale of an insurance business in late 2019. Berkshire has held on to other old-fashioned businesses, including door-to-door vacuum-cleaner business Kirby Co. and encyclopedia publisher World Book.
Newspapers have made up a small part of Berkshire Hathaway, which owns an assortment of more than 90 companies and holds major investments in companies like Coca-Cola Co., Apple and Wells Fargo.
Information for this article was contributed by Michael J. de la Merced of The New York Times; by Josh Funk of The Associated Press; by Katherine Chiglinsky, John J. Edwards III and Gerry Smith of Bloomberg News; and by Taylor Telford of The Washington Post.
Business on 01/30/2020