Los Angeles: Warren Buffett’s Berkshire Hathaway Inc has agreed to sell its newspaper business to Lee Enterprises Inc for $140 million in cash, abandoning an industry the billionaire investor had long defended even as its financial prospects deteriorated.
The transaction includes 31 daily newspapers and 49 weeklies including the daily ‘Omaha World-Herald’ in Berkshire’s hometown in Nebraska, ‘Buffalo News’ in New York, ‘Richmond Times-Dispatch’ in Virginia and ‘Tulsa World’ in Oklahoma.
Lee owns 50 daily newspapers including the ‘St Louis Post-Dispatch’, and has since July 2018 managed Berkshire’s papers other than the ‘Buffalo News’, which Berkshire bought in 1977.
As part of the transaction, Berkshire will also become Lee’s sole lender, refinancing the Davenport, Iowa-based company’s existing debt and lending $576 million at a 9% interest rate.
A closing is expected in mid-March. Lee shares more than doubled in early trading Wednesday and were last up 67 per cent at $2.10.
Berkshire has more than 90 operating businesses such as the BNSF railroad and Geico auto insurer, and bought most of its newspapers in the last decade.
While newspapers are a small part of the conglomerate, it nonetheless remains unusual for Buffett, who delivered newspapers as a teenager, to sell an entire operating business.
Buffett told shareholders on Berkshire’s website that he has ‘no interest at all’ in selling good businesses, and is ‘very reluctant to sell sub-par businesses’ expected to generate cash, be run well and have good labor relations. But he has lamented the newspaper industry’s decline, as the Internet deprives traditional newspapers of revenue streams.
Employment in Berkshire’s newspaper units fell 23% to 3,685 at the end of 2018 from 4,761 three years earlier. The World-Herald was not spared also. Dozens of jobs have been eliminated, including nearly all its business reporters, and the newspaper no longer covers Berkshire frequently. Journalists there voted to unionise in October 2018.