Shares of Lee Enterprises (LEE) - Get Report, one of the country’s biggest newspaper publishers, soared Wednesday after it said it was buying Berkshire Hathaway’s (BRK.B) - Get Report newspaper division for $140 million cash.
Berkshire CEO Warren Buffett has had a lifelong affinity for newspapers, delivering them as a boy in Washington.
He built BH Media’s stable of papers, which now stands at 30, even while revenue dropped as the internet pulled away readers and advertisers.
Buffett liked to invest in papers for their regular profits and cash flow. But those profits and cash flows are now disappearing for almost every publication outside of major papers like the New York Times, the Wall Street Journal and the Washington Post.
Buffett has also been reluctant to sell businesses. But Berkshire, the Omaha investment company, has been shrinking its newspaper operations, and last year Buffett called papers “toast.”
Lee, which already operates Berkshire’s papers, owns 50 publications, including the St. Louis Post-Dispatch. Berkshire’s papers include the Buffalo (N.Y.) News.
As part of the deal, Berkshire is lending Lee $576 million at a 9% annual rate.
“This is a compelling and transformative transaction for Lee,” Lee Chairman Mary Junck said in a statement.
“It both refinances our long-term debt on attractive terms and provides new revenue opportunities as well as operational synergies across an expanded portfolio.”
As for Buffett, “My partner Charlie Munger and I have known and admired the Lee organization for over 40 years,” he said in a statement.
“They have delivered exceptional performance managing BH Media’s newspapers and continue to outpace the industry in digital market share and revenue. We had zero interest in selling the group to anyone else.”
At last check, Lee shares traded at $2.10, up 67%. They've traded on Wednesday at as much as $3.09, more than double Tuesday's close at $1.26.
Berkshire Class B shares traded at $226.11, up 0.9%.
The author owns shares of Berkshire Hathaway.