By Andrew Frye - Dec 1, 2011 6:59 AM GMT+1300
Warren Buffett’s Berkshire Hathaway Inc. will expand its media holdings by acquiring the Omaha World-Herald Co., publisher of the billionaire’s hometown newspaper.
Terms weren’t disclosed for the deal, which would give Berkshire control of the World-Herald, six other daily newspapers and several weekly newspapers across Nebraska and Southwest Iowa, according to a company statement today. Sellers include employee shareholders and the Peter Kiewit Foundation.
Buffett is putting aside doubts about the industry after telling shareholders in 2009 that many papers have “potential for unending losses” and that he wouldn’t buy most of them “at any price.” Publishers have lost revenue as readers shift to other media including the Internet.
“He’s rooting for the home team,” said Jeff Matthews, a Berkshire shareholder and author of “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett.” “But he says it’s profitable and well-run, and it probably cost next to nothing.”
The World-Herald is 80-percent owned by its employees and 20-percent held by Peter Kiewit Foundation, the paper said today in a news story about the deal. It’s the No. 49 newspaper in the U.S. by daily distribution of the print edition, the newspaper said. Terry Kroeger, the company’s CEO, will stay with the business after the acquisition, Berkshire said.
Newspaper Holdings
Buffett, in his fifth decade as CEO of Berkshire, won a Pulitzer Prize -- the industry’s highest honor -- for investigative reporting in 1973 as owner of the Omaha Sun. The paper was cited for an analysis of funding at Boy’s Town, a local charity, according to Alice Schroeder’s biography, “The Snowball, Warren Buffett and the Business of Life.”
Berkshire’s holdings include Business Wire, which distributes press releases to the media. Buffett’s firm is also the biggest shareholder of the Washington Post Co. (WPO) and owner of the Buffalo News of New York.
“It’s a business which has been overly maligned for having lost its relevance,” said Thomas Russo, a partner at Berkshire investor Gardner Russo & Gardner. “I suspect the price is such that he can pencil out a return.”
Chopping Down Trees
Buffett has been among the industry’s critics and derided the newspaper model at Berkshire’s 2008 annual meeting, according Matthews’s book.
“Imagine that someone came along saying, ‘I have a great idea: Let’s chop trees down, buy expensive printing presses, and buy a fleet of delivery trucks, all to get pieces of paper to people to read about what happened yesterday,’ ” Buffett said, according to Matthews.
The World-Herald is the largest employee-owned newspaper in the U.S., with a news staff of about 200 who produce morning and evening editions, according to its website.
Joel Long, the World-Herald’s spokesman, wasn’t available for comment.
The purchase won’t have much impact on the overall performance of Berkshire Hathaway, which generated $136 billion in revenue last year and $13 billion in profit on activities that include insurance, running utilities and railroads, real estate, manufacturing and retailing.
Brand Names
Brands include Geico insurance, Fruit of the Loom underwear and Dairy Queen ice cream. Berkshire is among the biggest stakeholders at banks including U.S. Bancorp and Wells Fargo & Co., and Buffett has come to the aid of financial firms such as Goldman Sachs Group Inc. and Bank of America Corp. with capital injections. He didn’t respond to an e-mailed interview request.
Berkshire’s Class A stock rose 3 percent to $116,389 as of 12:40 p.m. in New York.
As for the World-Herald, “it’s very difficult to see this as a financial investment,” said Meyer Shields, an analyst with Stifel Nicolaus & Co. who has a “hold” recommendation on Berkshire’s stock. Buffett has “a desire to cultivate his legacy, and if he can control the first draft of history, that makes it a little bit easier.”
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