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Berkshire Hathaway Takes Active Role in Boosting Newspapers it Has Bought

By Dan Weil   |   Friday, 03 Jan 2014 12:44 PM

Warren Buffett's Berkshire Hathaway has broken its usual purchase pattern in handling the newspapers it has acquired.

While Berkshire usually buys businesses that don't need much help, troubled newspapers do need assistance, and the company is providing it, The Wall Street Journal reports.

For example, Berkshire is furnishing the papers with cash, so they don't need expensive bank loans to survive.

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"Not having the suffocation of debt means you have more breathing room," Tom Silvestri, publisher of the Richmond Times-Dispatch, which Berkshire bought in 2012, told The Journal.

Berkshire now owns about 70 newspapers, for which it spent around $400 million. Most of the properties, including the Times-Dispatch, came in a $142 million deal to buy 63 papers from Media General in 2012.

Buffett apparently has a special place in his heart for newspapers. He was a paperboy growing up and has invested in papers, including The Washington Post, throughout his career. He also has expressed interest in buying more.

Newspapers represent a drop in the bucket for Berkshire, producing about $500 million in annual revenue, or 0.3 percent of the company's $162 billion total.

Although "circulation, advertising and profits of the newspaper industry overall are certain to decline" and "the properties we purchased fell far short of meeting our oft-stated size requirements for acquisitions," Buffett explained in his annual letter to shareholders, "I love newspapers and, if their economics make sense, will buy them even when they fall far short of the size threshold we would require for the purchase of, say, a widget company."

Meanwhile, Berkshire is set to miss Buffett's performance goal for the first time in 44 years, Bloomberg reports. He aims to grow his company's net worth, as measured by its book value, at a faster rate than the total return of the Standard & Poor's 500 Index.

But while the S&P 500 generated a 128 percent total return in the five years since the end of 2008, Berkshire's book value per Class A share gained only 80 percent from that time until Sept. 30, according to Bloomberg.

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