Billionaire Buffett splashes out on still more newspapers
People wondered if 81-year-old Warren Buffett, probably America's most respected investor, was joking when he started talking up the panic-stricken newspaper industry.
Warren Buffett: newspaper empire grows
They should have known better. His company, Berkshire Hathaway , has just bought most of Media General Inc's papers in the Southeastern US for $142 million in cash.
And a Buffett strategy is emerging. The billionaire is going for smaller papers with high market penetration.
The deal, announced yesterday, makes Buffett one of the largest publishers in the United States, with a total of 25 newspapers.
In the US as in Britain , the industry has suffered plummeting advertising revenue and sales, with readers migrating online.
But Buffett, whose company is in everything from ice cream to insurance , is always on the hunt for good value. He told his Berkshire shareholders in May that he was going to spend more money on newspapers because he still views them as the primary source for local information.
Berkshire will lend Media General $400 million and provide a $45 million credit line.
Buffett's papers will operate under BH Media Group, a new subsidiary of Berkshire Hathaway. The sale does not include newspapers in Media General's Tampa division, which will be sold separately.
The Poynter Institute's Rick Edmonds told Thomson Reuters that without the Tampa paper, the group Berkshire bought is probably "modestly profitable."
When the deal is done, Buffett's daily papers will have a total weekday circulation of around 800,000.
Berkshire already owns the Buffalo News, the Omaha World-Herald , and a stake in the Washington Post .
Significantly, with the Media General deal, Buffett will own, outright or in large part, three of the top 10 newspapers in the country by market penetration, although none is in the top 25 nationwide by circulation.
Benchmark Capital analyst Edward Atorino said, "Berkshire Hathaway is clearly giving a vote of confidence to small-town local newspapers. They didn't buy the big city newspaper Tampa Tribune, which is struggling.
" This is chump change, but Berkshire Hathaway doesn't fool around. I don't think Berkshire Hathaway does anything where they're going to lose money."
Buffett is paying slightly less for the Media General papers than he paid last year for his hometown paper, the World-Herald. That deal included six other dailies and several weeklies in Nebraska and Iowa.