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Lee Enterprises makes $140M deal to buy Berkshire papers as Warren Buffet exits news business
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Lee Enterprises makes $140M deal to buy Berkshire papers as Warren Buffet exits news business

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Warren Buffett

Buffett

DAVENPORT, Iowa — Lee Enterprises will buy Berkshire Hathaway’s BH Media Group publications and The Buffalo News for $140 million, the company said Wednesday.

The deal markets billionaire Warren Buffett's exit from the newspaper business.

Buffett is a lifelong fan of newspapers but he has said for several years that he expects most of them to continue on their declining trajectory, save for a handful of national papers such as The New York Times and The Wall Street Journal.

The deal covers 31 daily newspapers in 10 states as well as 49 paid weekly publications with digital sites and 32 other print products. BH newspapers include the Omaha World-Herald in Nebraska, the Tulsa World in Oklahoma and the Winston-Salem Journal in North Carolina. As part of the agreement, Lee will enter into a 10-year lease for BH Media's real estate.

Lee Enterprises, a publicly traded company based in Davenport, Iowa, owns half of Capital Newspapers, which publishes the Wisconsin State Journal, Capital Times and several other regional papers. The Capital Times Co. owns the other half.

Lee has been managing the BH Media publications since July 2018. The sale is a logical step for Berkshire after hiring Lee to manage most of its papers, said analyst Ken Doctor, who writes the Newsonomics blog.

“That was a first step in gaining some efficiency of scaled management," Doctor said. "Further, it was a clear acknowledgment by Warren Buffett, a longtime major supporter the press, that he no longer believed the print newspaper business could be turned around.”

The sale price Berkshire agreed to for all its newspapers is less than the $142 million it paid in 2012 for a group of Media General newspapers.

The deal reinforces that the newspaper industry is out of favor with most investors, said Rick Edmonds, a media business analyst with The Poynter Institute.

“It's a further unfortunate event for an industry that's already been having a lot of tough times,” Edmonds said.

The deal will increase Lee's size significantly. The Davenport, Iowa-based company said 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 CEO, 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.

Newspapers make 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.

“I think Buffett is trying to clean some things up. These little pieces aren't worth his time,” said Andy Kilpatrick, who wrote “Of Permanent Value: The Story of Warren Buffett.”

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 it also expects to increase revenue by about $5 million by focusing on growing digital revenue and changes to subscription pricing.

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