The investor known as the “Sage of Omaha” announced on Wednesday the sale of his Berkshire Hathaway Media Group of 30 daily papers to Lee Enterprises, which publishes the Lompoc Record and Santa Maria Times among its hundreds of publications. Lee had been managing the Berkshire media group for the past 18 months and was well into a three-year digital subscription revenue plan, said Kevin Mowbray, CEO of Lee Enterprises.
Both Warren Buffett and his longtime partner Charlie Munger — a part-time Santa Barbara resident who offered $200 million for modern dormitories at UCSB in 2016 — expressed confidence that the Lee organization was “best positioned to manage through the industry’s challenges” and stated they had “zero interest” in selling to anyone else. “I am confident that our newspapers will be in the right hands going forward,” Buffett said in a press announcement. For their part, Lee chairman Mary Junck said the similar cultures at both organizations — “innovation and a deep-rooted commitment to local news” — would enable them all to evolve as “dollars shifted from print to digital.”
Davis Taylor, publisher for the region’s Lee papers, said he expected the acquisitions to have no effect on local operations, which include the Santa Ynez Valley News. “I think the acquisition is great news for Lee overall,” he said, and that the purchase seemed to be a good deal for his parent company.
The terms of the deal are as good as Lee Enterprises could hope for. Chief Financial Officer Tim Millage said in a conference call Wednesday morning that Lee visited numerous financiers, looking to refinance its debt; Berkshire’s offer of $576 million to refinance Lee’s existing $400 million debt plus the $140 million purchase of its media group came at a “highly attractive” 9 percent rate for 25 years. Millage said the refinance alone saved about $5 million per year and was free of prepayment penalties or performance covenants. The deal additionally left many millions to enable Lee to terminate its revolving line of credit.
Once Lee completes the purchase of Berkshire’s print and digital products of the 30 dailies, more than 49 paid weeklies, and about 32 other Berkshire publications, its audience will double. The deal does not include the associated real estate. The publisher expects to reap between $20 million and $25 million in “synergies,” a euphemism that indicates greater economies through combining elements of its digital advertising and subscriber program management, and administrative expenses. The Berkshire deal is before the Securities and Exchange Commission and is expected to close in mid-March.
Based in Davenport, Iowa, Lee Enterprises was founded in 1890 by A.W. Lee, and currently has a circulation of about 1 million readers, with 50 dailies and 300 other publications in 21 states. The publisher trades on the New York Stock Exchange as LEE, and its website boasts that Sam Clemens wrote for its Muscatine, Iowa, paper as a teenager. The sale puts into Lee’s hands Pulitzer-winning papers like The Buffalo News, the Omaha World-Herald, and Virginia’s Richmond Times-Dispatch, as well as the 162-year-old Daily Nonpareil in Council Bluffs, Iowa.