After spending 42 years as Warren Buffett‘s Berkshire Hathaway, The Buffalo News is being sold to Lee Enterprises, an Iowa-based chain that owns 50 newspapers, mostly in the Midwest.
With the $140 million deal completed, Lee Enterprises will become only the third owner in the 140-year history of The News. The deal also marks the end of Buffett’s entry into the newspaper business.
“My partner Charlie Munger and I have known and admired the Lee organization for over 40 years,” Buffett said. “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 for one simple reason: We believe that Lee is best positioned to manage through the industry’s challenges. No organization is more committed to serving the vital role of high-quality local news, however delivered, as Lee. I am confident that our newspapers will be in the right hands going forward and I also am pleased to be deepening our long-term relationship with Lee through the financing agreement.”
Mary Junck, Lee’s chairman, called the purchase of BN Media a “compelling transaction.”
“It provides new revenue opportunities and achievable synergies,” she said during a conference call. “It deepens a long relationship with Berkshire Hathaway.”
Additionally, Lee announced that it expects cost savings of about $25 million over the next two years because of the deal. Once the deal closes, Lee will have increased its revenues by 87%.
However, Berkshire will still retain important financial ties to Lee as it is providing Lee with $576 million in long-term financing, carrying an interest rate of 9%. This funding will also Lee to refinance its $400 million in existing debt and save about $5 million annually in interest.
Lee also will sign a 10-year lease deal for BH Media’s real estate, which will provide Berkshire with payments totaling $8 million annually.