The world’s fourth-richest man and founder of major investment firm Berkshire Hathaway, Warren Buffett, isn’t betting on one industry anymore: newspapers.
Despite being a longstanding supporter of newspapers, Buffett announced he would sell his print empire for US$140 million (AU$207.5 million) to local news provider Lee Enterprises, which will include 31 daily newspapers and 41 weekly papers.
As part of the deal, Berkshire Hathaway will also extend US$576 million of long-term financing to Lee Enterprising.
Lee already has a suite of 50 newspapers, specialty publications and websites across 21 states, and in 2018, the company took over management of all of Berkshire’s newspaper businesses except the Buffalo News.
“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,” Buffett said in a statement Wednesday.
As a result of the sale, Lee Enterprises’ stock soared a whopping 57 per cent, and the news provider is expecting the deal to boost its earnings and drive an 87 per cent rise in revenue.
The billionaire, who delivered The Washington Post as a child, and later purchased a stake in the paper in the 1970s, called local newspapers a “good business”, but a “declining business” back in 2013.
“The rate of decline will depend on how indispensable we make ourselves,” he said at the time.
But last year, Buffett was a little less optimistic, saying most newspapers were “toast”.
According to Investopedia, Buffett’s decision to sell comes as Berkshire faces increasing pressure from investors to increase its stock performance, which has lagged behind the broader market in recent years.
The newspaper industry
In the US, the estimated weekday print newspaper circulation decreased 12 per cent in 2018, and the Sunday print circulation decreased 13 per cent that same year.
According to PEN America, about 20 per cent of US newspapers have closed since 2004, and the sector has shed 47 per cent of its jobs.
In Australia, the total newspaper market was worth around $2.77 billion last year, but is expected to drop to around $2.42 billion in 2022.
But while print is on the decline, the digital newspaper market is actually increasing, statistics site Statista revealed.
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