ANALYSTS REACT TO BH MEDIA’S MANAGEMENT DEAL WITH LEE
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.