Buffet's Bid for Media General

Advanced Corporate Finance

Team 3 - Group 2

Giovanni MINI 39632

Valentin ORTAIS 39638

Thomas PEYRE 39646

Audrey RICHE 40159

Maxime ROCHE 39660

BUFFETT’S BID FOR MEDIA GENERAL

NEWSPAPERS

1. Why does Warren Buffett want to buy Media General Inc.’s newspaper division?

Warren Buffett has several incentives that make him want to buy Media General Inc’s newspaper

division.

First, Warren Buffett was a newspaper kid. He has always been attracted to the newspaper

business. Through his company Berkshire Hathaway, he already bought the Washington Post in 1973, the

Buffalo News in 1977 (he made it profitable after 10 years of losing money) and the Omaha World-Herald

newspaper in 2011. So he has already proved himself improving other newspaper companies and buying

Media General Inc’s newspaper division would diversify his newspaper companies portfolio. Why wouldn’t

he be able to do it again with Media General Inc ? He’s experienced and knows the business well.

Moreover, through the acquisition of Media General Inc, his strategy is to focus on local

newspapers. Indeed, he doesn’t want to buy the biggest newspaper of Media General, the Tampa Tribune

(the most widely spread newspaper), which is the one that is the most likely to face fierce competition like

TV channels and digital medias. In small communities, 80% of people rely on a local newspaper to get

information and 32% had visited their website. Thus, it’s unlikely that these conservative customers will go

away. It suits Buffett’s strategy : he’s known to be a conservative investor with a long term vision. He’s

targeting online subscriptions more than print copies and this transition is considered as a long term

investment and he’s willing to do it.

Furthermore, this investment (we will see it more in details in the upcoming questions) is deemed to

be cheap. Buffett acquired the Omaha World-Herald newspaper for 200M$ and it was considered

overvalued. Here the deal is about 63 local newspapers for 142 M$.

Finally, to...