AN­A­LYSTS RE­ACT TO BH ME­DIA’S MAN­AGE­MENT DEAL WITH LEE

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In­dus­try watch­ers re­acted with in­ter­est to the an­nounce­ment that Lee En­ter­prises would man­age Warren Buf­fett’s BH Me­dia papers in 30 mar­kets, an ar­range­ment un­der­way as of July 2.

“The an­nounce­ment did not say, but my guess is that Lee is now po­si­tioned to ac­quire the BH papers at a later date,” wrote Poyn­ter In­sti­tute an­a­lyst Rick Ed­monds. “The move in­di­cates Buf­fett's sour­ing on the prospects of lo­cal news­pa­pers, as he has said at re­cent share­holder gath­er­ings, and a sort-of phased with­drawal from the busi­ness.”

Lee CEO Kevin Mow­bray said his com­pany looks to make some $50 mil­lion over the five-year agree­ment. The agree­ment sets a yearly $5 mil­lion fixed fee plus a sig­nif­i­cant per­cent­age of prof­its over bench­marks. Ei­ther party can ex­tend the agree­ment.

The agree­ment gives Lee the flex­i­bil­ity to im­ple­ment rev­enue ini­tia­tives and busi­ness trans­for­ma­tion con­sis­tent with how it man­ages its own news­pa­per and digital op­er­a­tions in 49 mar­kets, while Berk­shire Hath­away re­mains owner of BH Me­dia.

Lee can cut staff with­out Berk­shire Hath­away’s ap­proval un­der the agree­ment. Cut­ting edi­tions or set­ting up out­side print­ing would re­quire Berk­shire ap­proval.

Mow­bray said BH Me­dia will re­tain edi­to­rial con­trol, con­sis­tent with Lee’s pol­icy of lo­cal edi­to­rial de­ci­sion-mak­ing.

Along with 30 daily news­pa­per and digital op­er­a­tions, BH Me­dia Group in­cludes 47 paid weekly news­pa­pers with web­sites and 32 other print prod­ucts. The com­pany’s daily papers in­clude the Omaha World-Her­ald, the first paper Berk­shire Hath­away bought, in 2011, the Press of At­lantic City, the Win­ston-Salem Jour­nal and the Rich­mond Times-Dis­patch.

BH Me­dia in­volves a small por­tion of Berk­shire Hath­away’s over­all $242 bil­lion in rev­enue. ‘A bet­ter stew­ard’

For­mer News Corp. ex­ec­u­tive Raju Narisetti told the World-Her­ald that the BH Me­dia papers would have got­ten “fire sale” prices if put up on the mar­ket. If a buyer had to take on ma­jor debt in the pur­chase, it might have led to big news­room cuts.

“By not sell­ing the chain to a vul­ture owner, Warren Buf­fett con­tin­ues to be a bet­ter stew­ard of these news as­sets than many might want to give him credit for this week,” Narisetti said.

Among pos­si­ble changes post-agree­ment, an­a­lysts say, are con­sol­i­da­tion of op­er­a­tions in cen­tral hubs, lay­offs and com­bin­ing of print­ing plants. Lee and BH Me­dia have an­nounced no such moves to date.

One ma­jor change has been an­nounced: BH Me­dia Group chair­man and CEO Terry Kroeger is step­ping down. Kroeger is also pub­lisher of the WorldHer­ald, a po­si­tion he will also leave. Kroeger told the paper he would stay with BH Me­dia for a tran­si­tion.

Lead­ers of both com­pa­nies ex­pressed en­thu­si­asm for the deal.

“Lee En­ter­prises’ growth in digital mar­ket share and rev­enue has out­paced the in­dus­try,” said Buf­fett. “Lee also has led the in­dus­try in over­all in­no­va­tion and per­for­mance, all while faith­fully ful­fill­ing its pub­lic trust as an in­dis­pens­able source for lo­cal news, in­for­ma­tion and ad­ver­tis­ing. Our mis­sions and goals match ex­actly, our mar­kets are sim­i­lar, and we both have ex­cel­lent man­agers. Op­er­at­ing to­gether will strengthen both of us, and Lee is log­i­cal to lead the process.”

“This is an at­trac­tive strate­gic al­liance for Lee, as it en­ables us to gen­er­ate more cash flow, speed our debt re­duc­tion, en­hance our in­dus­try lead­er­ship and fur­ther ad­vance our abil­i­ties as we in­tro­duce our digital and print strate­gies at BH Me­dia prop­er­ties,” said Mary Junck, ex­ec­u­tive chair­man of Davenport, Iowa-based Lee En­ter­prises.

The con­tract ex­cludes man­age­ment of BH Me­dia tele­vi­sion op­er­a­tions, as well as The Buf­falo News.

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