Buffett Expands Print Media Biz. - Analyst Blog
19 May 2012 - 2:49AM
Zacks
In 2009, Warren Buffett, Chairman and CEO of Berkshire
Hathaway Inc. (BRK.A) (BRK.B), stated that it was not very
reasonable to continue his ownership of the newspaper business. He
did not particularly like the practice of newspaper companies
providing news online for free, yet charging for the same in print.
According to Buffett, online news posed a threat to the print
medium.
However, it seems that Buffett’s outlook toward the future of
the newspaper industry has changed and Thursday’s announcement to
acquire 63 daily and weekly newspapers from Media General, at
approximately 100% premium to Media General’s current market
capital, points to the fact.
Berkshire Hathaway is expanding its newspaper business by paying
a total amount of $142 million. It will also aid Media General,
loaded with debt and ailing with decreasing earnings, by providing
a loan of $400 million and $45 million of revolving credit. As a
result of this financing, Buffett will gain control over 19.9% of
Media General’s outstanding shares.
The deal is expected to close toward the end of June. Per the
deal, Berkshire will own all newspapers owned by Media General
except the Tampa Tribune of Florida and some smaller newspapers in
the region. Some of the papers acquired include Richmond
Times-Dispatch in Virginia, the Winston-Salem Journal in North
Carolina and the Morning News of Florence, S.C., among others.
In November 2011, Buffett announced the purchase of The Omaha
World-Herald Company, publisher of Nebraska’s principal daily
newspaper, for $200 million. The deal added the World-Herald, six
other daily newspapers and several weekly newspapers to the
company’s media business portfolio. Berkshire’s media business
portfolio also includes Business Wire and The Washington
Post Co. (WPO).
Buffett’s altered opinion indicated that he was optimistic about
the newspaper industry and considered it to be an institution,
which holds a lot of importance in regions with a strong sense of
community. He also believes that newspapers, which have been facing
stiff competition from digitization, can prevent waning sales by
focusing on providing community news.
Despite being a small budget deal, it has managed to create a
stir, particularly amongst those who follow Buffett’s investment
moves. Now that Buffett has changed his bearish outlook on the
print media industry, we may witness new investment activity in
this domain.
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis Report
BERKSHIRE HTH-B (BRK.B): Free Stock Analysis Report
WASHINGTON POST (WPO): Free Stock Analysis Report
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