Berkshire Hathaway has closed on its acquisition of 63 daily and weekly newspapers, and that means the seller, Media General, is getting very close to being a broadcast-based company. MG now has $142M in the bank and a television-centric focus.
The company is close to ending a 160 year run in the newspaper business. The final outpost is Tampa-St. Petersburg, where prospective buyers are in talks with the company.
MG’s Marshall Morton explained the deal from his company’s perspective. He said, “We will now focus on our higher margin Broadcast television business. We have an attractive economic model, fueled by revenue growth, including Political, Retransmission and Digital revenues. For the second quarter of 2012, we expect to report Political revenues of more than $7 million, reflecting spending by both presidential campaigns, Super PACs, and contested races in our markets, including the Massachusetts Senate race and primaries in Virginia and South Carolina. We now expect Political revenues for the full year 2012 to be at the high end of our previously announced range of $40-45 million.”
Morton added, “Our plans are underway to increase Broadcast cash flow and EBITDA margins. At the market level, we are focused on ratings and share increases as well as expense management. At the corporate level, as previously announced, we are reducing corporate expense from $32 million to $20 million, a run rate we plan to achieve before the end of this year. The increased cash flow will support and accelerate our deleveraging plan and we have good incentive to do so. Our new term loan agreement provides a stepdown in the interest rate from 10.5 percent to 9 percent if leverage were to reach 3.50x.”
RBR-TVBR observation: We sincerely hope that Warren Buffett has a business model in mind that will restore health to the newspaper business – as consumers and citizens, we happen to like newspapers and believe they should remain an integral part of a healthy democracy.
However, we are not at all surprised that a company with a newspaper division and a television division is staking its future on the television side.
