Alden chases Lee as Buffett opts to be banker, landlord

The anticipated deal for Lee Enterprises to acquire BH Media's publications and the Buffalo News has been eclipsed by news this morning that Alden Global Capital's MNG Enterprises has taken a 5.9 per cent stake in Lee.

Iowa-based Lee Enterprises is paying US$140 million cash, which in turn is being loaned to it by Warren Buffett's Berkshire Hathaway as part of US$576 million of long-term financing (at nine per cent interest) which will also refinance existing debt and repay a revolving credit facility.

MNG's new holding as valued at about US$9.23 million.

Alden, criticised in a New York Times story this week for its "cut-to-the-bone management strategy" has been active in the newsmedia market recently, becoming the biggest shareholder in Tribune Publishing, even though its holding is currently limited to a third of stock.

Frustrated in its efforts to acquire Gannett ahead of its merger with Gatehouse, Alden is thought to want to create a new major player, with McClatchy a possible target as it fights the threat of bankruptcy after missing pension and debt interest payments.

The sale of BH Media's publications had been in prospect since Buffett contracted with Lee to manage them in July 2018, and in a statement yesterday he said he had "zero interest" in selling to anyone else. He said Lee was "best positioned" to manage through the industry's challenges.

"No organisation is more committed to serving the vital role of high-quality local news, however delivered."

Buffett started collecting newspapers with the Buffalo News in 1977 when he was still on the board of the Washington Post, and added his local newspaper, the Omaha World-Herald (US$150 million) and Media General (US$145 million) in 2011-12 - and later the Tulsa World - to create BH Media. In addition to the refinancing deal, Berkshire Hathaway will retain property and fixed machinery.

Lee's acquisition almost doubles its size and is expected to increase revenue by 87 per cent.

It's been an emotional journey for Buffett, who is 89, and his connection with the news industry - as Lee Enterprises' banker and landlord - may yet prove worthwhile. What Alden brings to the table, with the news businesses already tightly managed, remains to be seen.

Peter Coleman

Pictured: Warren Buffett at the 2018 annual meeting

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