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BH Media Group was impressed with the Roanoke community's solid economy and strong sense of itself, CEO Terry Kroeger said.
Thursday, May 30, 2013
The $162 billion-a-year financial powerhouse that is buying The Roanoke Times is the brainchild of an investor who got his start delivering newspapers in his Nebraska hometown.
Warren Buffett, the 82-year-old whose mantra has been to search for value in unexpected places, has changed his mind in recent years about the news business.
“I have long told you … that the circulation, advertising and profits of the newspaper industry overall are certain to decline,” Buffett told Berkshire Hathaway Inc. stockholders in his latest annual letter to them.
But, he continued, “I believe that papers delivering comprehensive and reliable information to tightly-bound communities … will remain viable for a long time.”
News is good business, as Terry Kroeger , chief executive officer of Berkshire Hathaway’s newspaper business, BH Media Group, put it.
So is Roanoke. When Berkshire Hathaway began taking a hard look at Roanoke late last year, it was the community, with a solid economy and strong sense of itself, that clinched the deal, Kroeger said.
It helped that Roanoke is near several papers that Berkshire Hathaway snapped up last year, when it acquired Richmond-based Media General’s lineup of 42 dailies and weeklies in Virginia, the Carolinas, Alabama and Florida for $142 million. That deal came just a few months after Berkshire Hathaway plunked down roughly $200 million to buy Buffett’s hometown paper, the Omaha World-Herald , and five smaller dailies in Nebraska and Iowa.
Buffett’s interest in newspapers continued well after his days as a paperboy in Omaha — where he had made such a success of his door-to-door sales efforts that he filed his first income tax return when he was just 14, carefully taking a $35 deduction for his bicycle. He bought The Buffalo News in upstate New York in 1977, and has owned a 1 million-plus share stake in The Washington Post since that time.
“He must think there is money to be made,” said Craig Huber, an independent media analyst at Huber Research Partners in Connecticut.
Because Berkshire Hathaway is not borrowing money against its new property, the risks for the paper and its employees of things not working out well is dramatically reduced, he said. For Buffett, though, the risk is that if the economy sours, there aren’t many places left to cut costs, he added.
Still, Buffett doesn’t seem to be thinking of slashing back for a fast return on his investment.
“We do not believe that success will come from cutting either the news content or frequency of publication. Indeed, skimpy news coverage will almost certainly lead to skimpy readership,” he told his stockholders.
“They really believe in newspapers … they believe in content, they understand its importance, and they believe in community,” said Danny Finnegan , editor of the Richmond Times-Dispatch, which Berkshire Hathaway bought last year.
Still, The Roanoke Times will be a small part of a very big operation. Berkshire Hathaway’s businesses range from GEICO insurance to the Burlington Northern Santa Fe Railway to Dairy Queen to Fruit of the Loom, and dozens of other financial and manufacturing firms.
The day before buying The Roanoke Times, Berkshire Hathaway nailed down a $5.6 billion purchase of NV Energy , the power company that serves Las Vegas. And earlier this year, while buying daily newspapers in Greensboro, N.C., and Tulsa, Okla., Berkshire Hathaway also picked up H.J. Heinz Co. for $28 billion in cash and debt.
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