The Buffalo News sold to Lee Enterprises
The Buffalo News has a new owner: Lee Enterprises. The announcement was made by Lee shortly after 7 a.m. Wednesday.
Lee becomes the third owner of The News in the newspaper's 140-year history. It was founded by the Butler family in 1881 and Warren Buffett’s Berkshire Hathaway took control in 1977. The News reported Lee previously owned 50 daily newspapers. With this new deal, the media giant will own 81 and nearly double its audience.
The deal announced Wednesday morning also includes 30 other daily newspapers operated by Berkshire Hathaway Media Group, a separate company. The total deal is valued at $140 million cash, according to a news release from Lee, and is expected to close in mid-March.
Berkshire Hathaway is also providing $576 million in financing to Lee as part of the deal, making Berkshire Hathaway the sole lender to Lee. That strategy is nothing new to Buffett, notes Rick Edmonds, media business analyst for the Poynter Institute.
"That's a way in which Berkshire Hathaway recovers some of its money, by having another part of the company be a lender," Edmonds said. "BH and Warren Buffett did the same kind of thing when they bought the Media General newspapers, the largest group of their holdings."
In its statement, Lee officials say it has identified approximately $20 million to $25 million of 'highly achievable annual synergies.' Specifically, the statement cites 'revenue synergies from the management of digital advertising and subscriber programs, and cost synergies, primarily from the reduction of administrative expenses.'
Warren Buffet also issued a statement via a press release: "My partner Charlie Munger and I have known and admired the Lee organization for over 40 years. 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."
President and Chief Executive Officer Kevin D. Mowbray issued a letter to Buffalo News employees, saying the deal "marks an historic milestone."
''We are confident we can achieve even greater success as one, integrated company," Mowbray said in his statement. 'This unique transaction is immediately accretive to earnings, decreases leverage and provides compelling refinancing terms. Most gratifying, it expands our partnership with a single long-term lender who shares our passion for the indispensable services we provide to our communities.”
Lee chair Mary Junck, during a Wednesday morning conference call, spoke of the company's commitment to local news and advertising but also hinted of a shift toward more digital content.
"The media landscape is evolving rapidly and that evolution will continue as audiences and advertising dollars shift from print to digital," Junck said. "But we know that our readers will continue to demand local news and information and they continue to look to us for it. We have proven ourselves to be flexible and nimble at rethinking and repositioning and redeveloping our business with a digital-first mindset."
Lee Enterprises has managed Berkshire Hathaway's other newspaper holdings in this transaction since 2018. WBFO forwarded a question during the Wednesday morning conference call whether Lee may expand the Buffalo News staff.
Dan Hayes, of the company's investor relations, replied with the following email message: "Lee has managed the BH Media Group newspapers over the last 18 months and know them well. Buffalo is Berkshire’s other daily newspaper, and we know very little at this point about operations there. Our CEO has established a good but so-far brief relationship with the publisher. We expect to learn a lot more beginning right away and certainly after closing in mid-March."
The Buffalo Newspaper Guild, which represents 200 Buffalo News employees, stated late Wednesday morning it was researching the potential impact of the sale on its membership.
Our leadership team is meeting, and we are in the process of researching and sharing what this means for our members. We will continue to do everything possible to safeguard the outstanding local journalism product that our @BuffaloGuild colleagues produce.— Buffalo Newspaper Guild (@BuffaloGuild) January 29, 2020
Buffalo Newspaper Guild President Sandra Tan tweeted "Shocked and speechless. But I expect to find words soon" at Wednesday's news of the sale. The Guild-CWA, Local 31026, represents about 250 employees at the newspaper.
Also expressing shock by the announcement was Lee Coppola, retired Dean of the School of Journalism at St. Bonaventure University and also a veteran of Western New York print and broadcast journalism. He says the Buffalo News was a stable newspaper in an unstable business. He is now concerned for the future direction of the operation.
"The trend has been for investment groups to come in and buy newspapers and then cut them to the bone," he told WBFO. "Detroit, Pittsburgh... I've seen the Denver Post go down to nothing. I'm worried that this organization will come in, start cutting to increase revenues and cut staff."
Edmonds, when asked if Lee might reinvest in building a local editorial staff for the Buffalo News, shared Coppola's opinion.
"I think they are more likely to cut and maybe - to the extent that the Buffalo News has, even while cutting maintained a big staff - some changes may be in the works there," he said.
Lee Enterprises listed the other dailies and digital operations involved in the sale:
- ALABAMA: Dothan Eagle, Opelika-Auburn News
- IOWA: The Daily Nonpareil in Council Bluffs
- NEBRASKA: Omaha World-Herald, The Grand Island Independent, Scottsbluff Star-Herald, The North Platte Telegraph, Kearney Hub, York News-Times
- NEW JERSEY: The Press of Atlantic City
- NEW YORK: The Buffalo News
- NORTH CAROLINA: Winston-Salem Journal, Greensboro News & Record, The News Herald in Morganton, The McDowell News, Statesville Record and Landmark, Hickory Daily Record
- OKLAHOMA: Tulsa World
- SOUTH CAROLINA: The Florence Morning News
- TEXAS: The Eagle in Bryan-College Station, Waco Tribune-Herald
- VIRGINIA: Richmond Times-Dispatch, The Daily Progress in Charlottesville, The Roanoke Times, Bristol Herald Courier, News & Advance in Lynchburg, Martinsville Bulletin, Danville Register & Bee, The Free Lance-Star in Fredericksburg, Culpeper Star-Exponent, The News Virginian in Waynesboro