Berkshire’s Risky Bet on Traditional Journalism

Warren Buffet’s Berkshire Hathaway (NYSE:BRKA) has announced its latest purchase of 63 daily and weekly newspapers from Media General (NYSE:MEG) for $142 million, in Berkshire’s second move in six months to expand into the depressed newspaper market.

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Per the terms of the deal, Media General will issue warrants on stock equivalent to 19.9 percent of the media company’s stock. The company has also said that it owns TV stations as well as digital assets. Berkshire will provide Media General with a $400 million term loan and a $45 million revolving credit line. In turn, Media General will use the loan to repay its existing bank debt due next March.

The newspapers being acquired from Media General are in Virginia, North Carolina, South Carolina, and Alabama. The Richmond Times-Dispatch is among the titles in those areas, but the deal does not include Media General’s Tampa title, such as the Tampa Tribune.

It has been no secret that Berkshire has shown interest in television media, as well. The company has acquired a small stake in Viacom (NYSE:VIAB) in the first quarter and has increased its stake in DirecTV (NASDAQ:DTV). Berkshire also has been a major shareholder in Washington Post Co. (NYSE:WPO). Last December, Berkshire agreed to purchase Omaha World-Herald Co., publisher of the Omaha World-Herald and six other daily papers in Nebraska and Iowa in a deal worth around $200 million.

The Internet has been a devastating blow to the newspaper industry in recent years. According to the Newspaper Association of America, print advertising revenue was cut almost in half in the 10 years to 2009.

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