Billionaire investor Warren Buffett is transitioning from an owner of newspapers to a financier.
His BH Media Group is selling its newspaper operations, including the Richmond Times-Dispatch and nine other daily newspapers in Virginia, to Lee Enterprises Inc. of Davenport, Iowa, a media company that has managed those publications for the past 18 months.
The sale, announced Wednesday, is for $140 million in cash, slightly less than the $142 million that Berkshire Hathaway Inc. — the Omaha, Neb.-based conglomerate managed by Buffett — paid for The Times-Dispatch and 63 other newspapers and related real estate properties from then-owner Media General Inc. in 2012.
While Berkshire Hathaway will no longer own newspapers, the company is providing $576 million in long-term financing to Lee Enterprises at a 9% annual rate.
The deal includes 30 BH Media daily newspapers in 10 states as well as The Buffalo News in New York, which Berkshire Hathaway bought in 1977. It also owns 49 weekly publications and 32 other print products.
When the deal is completed, which is expected in mid-March, Lee Enterprises will own and operate 81 daily newspapers.
Lee now owns 50 daily newspapers and more than 200 weekly and specialty publications in 20 states. It has newspapers in St. Louis; Davenport; Lincoln, Neb.; Madison, Wis.; Billings, Mont.; and Tucson, Ariz.
Shares in Lee Enterprises rose 66.67%, or 84 cents, to close at $2.10.
The acquisition comes as the print media industry continues to battle for readers and advertising revenue as consumers and ad dollars increasingly shift toward online media.
Buffett, Berkshire Hathaway’s chairman and CEO, said in a statement Wednesday that his company has had a long-standing relationship with Lee Enterprises.
“They have delivered exceptional performance managing BH Media’s newspapers and continue to outpace the industry in digital market share and revenue,” he said.
“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,” Buffett said. “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.”
Buffett, who delivered papers as a teenager and is a lifelong fan of newspapers, has become more uncertain about the industry because of drops in advertising revenue. In an interview with Yahoo Finance in April, he said that most newspapers were “toast.”
The deal was portrayed in many media outlets on Wednesday as Buffett “giving up on newspapers” less than 10 years after he jumped in to buy many local publications.
Ken Doctor, a media industry analyst and commentator, said that approach is “a good attention-grabber, but underplays how today’s sale is just the next logical step for Buffett.”
The sale “is no surprise,” given that Lee Enterprises had already been managing the newspapers for Berkshire Hathaway since July 2018, Doctor said.
“Lee Enterprises both adds scale, can act on ‘synergies’ and in one deal refinances its pesky debt,” Doctor said about the deal.
He said the sale indicates that print media executives have identified mergers and acquisitions as “their best strategy to remain profitable businesses in the next several years.”
BH Media Group generated $373 million in revenue in 2019 and had adjusted operating profit of $47.4 million. The acquired properties will boost Lee Enterprises’ revenue by about 87 percent and its adjusted operating profit by about 40 percent, the company said.
In Virginia, BH Media owns 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, and The News Virginian in Waynesboro.
Lee Enterprises reported a profit of $15.9 million on revenue of $509.8 million for its most recent fiscal year, which ended Sept. 29, compared with a profit for 2018 of $47 million on revenue of $543.9 million. Revenue has declined each year from $648.5 million in 2015.
Executives with Lee Enterprises on Wednesday said the deal would give the company more size and scale, enable it to cut expenses, and provide it with more financial flexibility.
“Lee’s focus is on delivering valuable, intensely local, original news and information,” said Mary Junck, the company’s chairman. “Clearly, the media landscape is evolving rapidly, and that evolution will continue as audiences and advertising dollars shift from print to digital, but we know that our readers will continue to demand local news and information and they will continue to look to us for it.”
As part of the deal, Berkshire Hathaway will become Lee Enterprise’s sole lender, providing about $576 million in financing to Lee at a 9% annual rate for 25 years with no performance covenants.
The proceeds will be used to pay for the acquisition, and will allow Lee to refinance its existing debt of about $400 million. It also will provide cash to allow for the termination of Lee’s revolving credit facility.
Lee Enterprises said it expects to see about $5 million of annual interest rate savings on its refinanced debt.
“I also am pleased to be deepening our long-term relationship with Lee through the financing agreement,” Buffett said.
Lee Enterprises began managing all BH Media publications in July 2018.
“Having managed the BH Media properties for the past 18 months, we already have deep knowledge into their operations,” said Kevin Mowbray, Lee’s president and CEO, in a conference call with investors and analysts on Wednesday.
“This transaction significantly enhances our financial profile,” Mowbray said. “It is expected to be immediately accretive to earnings and will enable us to accelerate our digital growth.”
Lee Enterprises executives said they expect to implement $20 million to $25 million in revenue and cost synergies from combining the operations. A significant portion of that will come from cutting administrative costs.
The sale does not include the real estate properties of the newspapers. Instead, Lee Enterprises will lease 68 properties from Berkshire Hathaway, including production equipment, under a 10-year agreement initially for $8 million a year.
Among the properties to be leased is the 427,000-square-foot production facility on 110 acres on Times-Dispatch Boulevard in the Atlee Station business park in Hanover County.
In late December, BH Media sold the four-story Richmond Times-Dispatch building in downtown Richmond to Shamin Hotels, the Richmond area’s largest hotel operator.
Shamin plans to move its corporate headquarters there from Chester later this year. The Times-Dispatch will remain in the building under a long-term lease. The newsroom, advertising and administrative offices will consolidate on the fourth floor, which is being renovated.
The Virginia Senate on Wednesday voted to roll back restrictions on abortion, a day after the House of Delegates backed a similar measure.
Lt. Gov. Justin Fairfax broke a 20-20 tie as the chamber approved Senate Bill 733 from Sen. Jennifer McClellan, D-Richmond, which would remove the mandatory 24-hour waiting period and the required ultrasound women must get before proceeding with an abortion.
The bill also would remove the requirement that printed material be given to a woman before she could have an abortion. In addition, it would allow nurse practitioners to perform abortions.
Sen. Joe Morrissey, D-Richmond, voted against the bill. Morrissey, a Catholic, also opposed abortion while serving in the House of Delegates. His opposition led to Fairfax, a Democrat, breaking the tie.
Wednesday’s endorsement came a day after the House of Delegates backed a similar measure, House Bill 980, sponsored by Majority Leader Charniele Herring, D-Alexandria, in a 52-45 vote. The House version allows licensed physician assistants to perform an abortion, while the Senate version was amended to take them out.
“When someone decides to have an abortion it should be safe, affordable and free from judgment,” said Sen. Mamie Locke, D-Hampton, before the vote.
Said McClellan: “It is time that we let women and their providers make their reproductive health decisions the same way we do for other medical procedures.”
Morrissey said he opposed eliminating the ultrasound and printed materials requirements, among other things.
“I don’t think government should be telling either a man or a woman what to do with their bodies,” he said in an interview after the vote, adding that he told the Democratic caucus about his opposition before the vote and discussed it with McClellan on Sunday.
Similar to the House discussion on Tuesday, Wednesday’s Senate debate, which lasted roughly an hour, included opposition from Republican women.
“This is our fight for life,” said Sen. Jen Kiggans, R-Virginia Beach, a nurse practitioner. “We’re fighting for people who can’t speak for themselves.”
Said Sen. Siobhan Dunnavant, R-Henrico, an OB-GYN: “While claiming to improve access, this bill actually removes sensible, reasonable protections for a procedure that deserves serious consideration.”
The Senate and House bills roll back some of the abortion regulations signed in 2012 by then-Gov. Bob McDonnell, which opponents called TRAP legislation — or “targeted regulation of abortion providers.”
Fairfax said in an interview: “It is important that we keep our commitment to protect women’s access to their own reproductive health care choices.” He called the regulations Democrats want to roll back “erroneous,” adding: “It’s a really great day for Virginia.”
The Senate on Tuesday rejected a substitute proposed by Sen. Steve Newman, R-Lynchburg, that would have also eliminated the ultrasound requirement while not moving forward with actions Sen. David Suetterlein, R-Roanoke County, called “politically motivated” and not “medically motivated.”
Morrissey didn’t cast a vote when the body voted on Newman’s substitute. He said Wednesday that he wanted to let McClellan’s bill get to the full floor.
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A Senate committee voted to ban electronic “skill games” in Virginia, but then left open the option to regulate them or allow full competition with slot machines in retail outlets across the state.
The series of votes by the Senate General Laws and Technology Committee on Wednesday leaves the decision to the Senate Finance and Appropriations Committee. Its chairwoman, Sen. Janet Howell, D-Fairfax, is now calling for a ban on unregulated electronic skill games that have been cutting into Virginia Lottery profits.
The decision to ban instead of regulate the games was the result of almost a week of fruitless meetings with opposing gaming companies to settle a battle between skill games and slot machines that Sen. Jeremy McPike, D-Prince William, said was unresolvable.
However, the finance committee will have two other choices besides Howell’s legislation, Senate Bill 971. It also will consider Senate Bill 960, proposed by Sen. Frank Ruff, R-Mecklenburg, to regulate electronic skill games and tax them at 20% of gross profits; and Senate Bill 1063, McPike’s proposal to allow games of skill and chance to compete legally in Virginia.
The Senate hasn’t begun to deal with an even bigger gaming issue — whether to allow casino gambling — and, if so, whether to open it to competition or award licenses to casino resorts already proposed in Richmond and four other cities.
McPike, who chaired a subcommittee on gaming that deadlocked last week over the different approaches to electronic gaming, said after the meeting on Wednesday that “the real policy decision” facing the Senate is “you either ban them or open up the floodgates.”
He blamed the impasse on skill game companies, led by Queen of Virginia Skill & Entertainment, which has installed 7,500 unlicensed and untaxed machines in restaurants and stores across the state, including 4,500 lottery outlets.
“Some parties want their own proprietary and monopolistic language in the statute,” McPike said.
Tom Lisk, lobbyist for Queen of Virginia and its Georgia-based parent company, Pace-O-Matic, said the committee’s decision to advance Ruff’s bill to the finance committee keeps the debate alive.
“We see this as an opportunity to continue the discussion with legislators to see if there is a regulatory framework and compensation that is fair to the commonwealth,” Lisk said.
A House General Laws Committee subcommittee had voted on Tuesday night to ban the machines instead of regulating them, as Gov. Ralph Northam had proposed. Del. Lamont Bagby, D-Henrico, introduced Northam-backed legislation that would have taxed the machines at a 35% rate.
A coalition of companies that make and distribute slot machines thinks a ban is the right place to begin the discussion.
“We don’t have games in Virginia,” said Steve Baril, a Richmond lawyer representing Las Vegas-based Golden Entertainment and other slot machine companies. “The whole purpose of banning games of skill is to create a level set so the commonwealth could make the decision whether it wants these gaming devices in Virginia.”
Otherwise, Baril said, “no one could compete for locations” against skill games under proposed regulations that he said would “essentially grandfather them and give them a monopoly.”
The slot machine companies support a 36% state tax on all machines — with 3% of proceeds going to localities. If the state adopted Ruff’s proposal, he said, “Virginia would be selling itself short.”
Howell had threatened to introduce legislation to ban the games unless Queen of Virginia and other companies raised the ante on taxes to offset the loss of lottery money for public education. Instead, she introduced a bill that initially would have regulated them and taxed them at a 10% rate.
The Senate committee approved a substitute proposal that simply would ban them.
Initially, McPike agreed to strike his bill, but he revived it after Ruff insisted on keeping his proposal alive for the finance committee to consider.
“If Senate Finance wants to kill it, they can kill it,” Ruff said.
General Laws Chairman George Barker, D-Fairfax, also serves on the finance committee, so “I’m going to get stuck with it either way,” he said.
Asked which approach he prefers, Barker replied, “I’m open right now.”
A divided Senate subcommittee endorsed a sweeping transportation bill on Wednesday that would raise Virginia’s gasoline tax by 12 cents a gallon over three years, but the legislation does not include major new highway safety requirements that Gov. Ralph Northam has proposed as part of the omnibus funding package.
The legislation also would restore the annual registration fees that Northam had proposed to cut in half.
Senate Majority Leader Dick Saslaw, D-Fairfax, who is sponsoring Senate Bill 890 for the governor, said he had removed provisions to ban open containers of alcohol in passenger areas, prohibit drivers from holding mobile phones in moving vehicles, and allow law enforcement to enforce mandatory seat belt use for drivers and their passengers as a primary offense, meaning they could be charged for that alone.
“That’s all out,” he told members of the Senate Finance and Appropriations Transportation Subcommittee. “What’s in is the economic part.”
The highway safety proposals, part of the omnibus transportation bill pending in a House of Delegates committee, are part of separate Senate legislation sponsored for the governor by Sen. Louise Lucas, D-Portsmouth, who also proposes to eliminate the state’s annual automobile inspection program to save consumers money.
House Bill 1414, sponsored by House Speaker Eileen Filler-Corn, D-Fairfax, includes an amended proposal to require the inspections every other year instead of eliminating them. The House Finance Committee is expected to vote on the legislation on Monday.
Saslaw predicted that the General Assembly would not change the annual inspection law.
“We’re going to keep inspections at one year,” he said after the subcommittee meeting.
Saslaw has had a long career in the retail gasoline business, but he said he no longer operates stations with service bays where inspections and repairs could be done.
The focus of the Senate version omnibus bill is raising more money for highway maintenance and construction, dramatic expansion of passenger rail service, dedicated funding of transit systems in Richmond and other metropolitan areas, and repairing and replacing old bridges and other structures.
The legislation also would raise two local taxes in Northern Virginia, as Northam and the Senate proposed two years ago, to restore $45 million in regional transportation funding that had been diverted to help repair the Washington Metro transit system.
Separately, the subcommittee merged and recommended approval of two bills, proposed by Sen. John Edwards, D-Roanoke, and Sen. Emmett Hanger, R-Augusta. Those measures would impose a 2.1% wholesale gas tax increase in rural regions of Virginia that currently don’t have higher regional taxes already being paid in Northern Virginia, Hampton Roads and along the Interstate 81 corridors in western Virginia.
“This goes to rural roads that need help, too,” Edwards said.
The Richmond region would be subject to higher fuel taxes as part of a proposed Central Virginia Regional Transportation Authority in legislation proposed by House Transportation Chairwoman Delores McQuinn, D-Richmond. The House Finance Committee approved House Bill 1541 on Wednesday and it will now go to the House Appropriations Committee for review.
“It will help us address the transportation needs in the region,” said John Easter, senior vice president of ChamberRVA.
The new authority would encompass nine jurisdictions in the region — Richmond, Ashland and the counties of Chesterfield, Henrico, Hanover, Goochland, Powhatan, New Kent and Charles City. It would raise an estimated $168 million each year in gasoline and sales tax revenue for the localities, region and GRTC Transit System to pay for transportation priorities.
But the most critical transportation funding issue facing the state is the continuing decline in gasoline and diesel taxes, even though people are driving more miles each year. The problem is twofold: people are using less gasoline because their vehicles are more efficient and the tax is tied to wholesale fuel prices, which have declined sharply since the state adopted a comprehensive transportation funding package in 2013 that was supposed to raise more than $6 billion in state and regional taxes.
The decline in fuel tax revenues would have been worse without a floor on wholesale gas prices that Saslaw urged in 2013 because of the market’s volatility.
The governor’s funding package would convert taxes from a wholesale to a per-gallon price, raise the tax by 4 cents a year for three years, and tie it to the consumer price index to keep up with inflation.
“So we don’t have to worry about that anymore,” Saslaw said.
Currently, Virginia taxes gasoline at 16 cents a gallon, or 22 cents a gallon when including regional taxes in a weighted average. The national average is about 36 cents per gallon.
“Even after we do all this, we’re still going to have the lowest gas tax in the Mid-Atlantic” region, Saslaw said.
The initial vote was unanimous, but subcommittee Chairman George Barker, D-Fairfax, later proposed to amend the bill to restore the registration fees the governor had proposed to cut in half. Barker and Saslaw voted yes, Hanger voted no and Sen. Steve Newman, R-Lynchburg, abstained.
The panel also considered eliminating the third-year gas tax increase at Hanger’s request, but agreed to leave the issue for the full committee to decide.
Newman said he expects ultimately to oppose both Saslaw’s and Edwards’ bills.
“I think the taxes are too high,” he said in an interview.