Warren Buffett said Lee Enterprises Inc. will manage its BH Media Group newspaper and digital operations in 30 markets, hoping to boost readership and draw more advertisers as print circulation declines.
Berkshire Hathaway Inc. will continue to own BH Media Group, which has 30 daily newspapers including its hometown Omaha World-Herald in Nebraska and 47 weekly newspapers, and retain editorial control.
Lee expects to earn about $50 million of fees under the initial five-year agreement, comprising $5 million annually plus a share of profits. Strategic decisions will be made jointly.
The agreement takes effect on July 2. Berkshire had invested in Lee in the past.
"I love our newspapers and am passionate about the vital role they serve in our communities," Buffett said in a statement. "Although the challenges in publishing are clear, I believe we can benefit by joining efforts."
Lee shares rose 45 cents, or 18.8 percent, to $2.85 in late morning trading. The Davenport, Iowa-based company said it has 46 daily newspapers including the St. Louis Post-Dispatch, and nearly 300 specialty publications in 21 U.S. states.
While newspapers are only a small part of Berkshire, which bought most of them earlier this decade, the transaction reflects Buffett's disappointment with the industry's decline.
He told shareholders at Berkshire's annual meeting on May 5 that only the Wall Street Journal, the New York Times and perhaps the Washington Post had found digital models to overcome declines in readership and print ad revenue.
Print circulation fell in 2017 at all but one of Berkshire's daily newspapers, which also include the Richmond Times-Dispatch in Virginia and Tulsa World in Oklahoma. The number of BH Media employees fell 11 percent last year to 3,719 from 4,194.
Berkshire was a major investor in the former Washington Post Co, whose board Buffett sat on between 1974 and 2011, with a hiatus when he was a director at Capital Cities/ABC Inc.
Tuesday's agreement excludes the Buffalo News in western New York state, a newspaper that Berkshire bought in 1977.
Berkshire owns more than 90 companies in the chemical, energy, food, insurance, railroad and other sectors, and has investments that include Apple Inc, Coca-Cola Co and Wells Fargo & Co.
(Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama and Steve Orlofsky)
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