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The Washington Post newspaper routes, for which the 13-year old Buffett rose early back in the 1940s, provided a large proportion of the $9,800 he saved in his teenage years. Who’d thought that this small amount of foundation capital would eventually lead to Buffett controlling the largest holding of Washington Post shares outside of the dominant family?
In spring and summer 1973 Buffett used some of the money he had raised for Berkshire Hathaway through the 20-year loan notes to buy shares in the Washington Post Company. The stake cost £10.6m and amounted to about 10% of the overall equity capital of the firm.
As well as the dominant Post newspaper the company also owned Newsweek, four television stations, two radio stations, print mills and paper plants. All-told Buffett thought the business was worth $400m to $500m, when Mr Market priced it at $100m
Before the deal
Katherine Graham was thrust into the role of leader of the Washington Post Company very unexpectedly when aged 46; and she did not welcome it. A shy person, diffident and with low self-confidence, her main preoccupation had been as a mother and homemaker. She knew nothing about management or editorial, but took it on as an obligation to maintain her legacy for the next generation of her family.
Her father had bought the Washington Post out of bankruptcy in 1933 and ran it as a privately-owned family firm. Later, her husband, Philip Kay, took over. It was only when mentally-disturbed Philip committed suicide in 1963 that Kay became President. The paper was then merely the third-placed Washington broadsheet.
The company did not float on the NYSE until 1971. Even then the family maintained voting control by holding on its “A” shares, while raising money by issuing “B” shares, with much lower voting rights per share (the B shareholders were entitled to elect a maximum of 30% of the Board of Directors).
Brilliant journalism and fearless editorial leadership propelled the Washington Post. For example,………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
