Buffett Nets Cool $44 Million in Quiet Media General Deal

Friday, 14 Jun 2013 10:03 AM

By Glenn J. Kalinoski

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The merger of Media General and New Young Broadcasting led to a benefit for Warren Buffett's Berkshire Hathaway, and provided an example of how the billionaire investor became one of the richest men in the world.

According to The Poynter Institute, the story begins with Buffett and Berkshire Hathaway purchasing all of Media General's newspapers, except the Tampa Tribune, in May 2012.

Berkshire Hathaway loaned Media General $445 million "to refinance a crushing debt load coming due," Poynter stated. The initial interest rate was 10.5 percent.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

Berkshire Hathaway got penny-a-share warrants to acquire 19.9 percent of the company. A benefit of the merger: Media General said last week it will be able to refinance its debt "at a considerable savings of interest expense."

Poynter reported that Berkshire Hathaway will reportedly be paid a $44 million premium as part of the refinancing.

Media General’s shares skyrocketed more than 30 percent the day the merger with New Young Broadcasting was announced, and have roughly doubled in value since Buffett’s investment just over a year ago.

Berkshire Hathaway picked up Media General's 63 dailies and weeklies for $142 million and has used them as the base for building a bigger chain, buying papers in Tulsa, Oklahoma, Greensboro, North Carolina, and Roanoke, Virginia, Poynter reported.

Media General's merger with New Young Broadcasting highlights the hastening consolidation in local TV, driven by the fees stations and broadcast networks are beginning to extract from cable and satellite operators such as Comcast and DirecTV, Bloomberg reported.

Media General will have about 89.1 million shares outstanding once the deal closes, including about 60.2 million issued to Young’s shareholders, according to Bloomberg.

With the combination, Media General will own 30 network affiliated stations in 27 markets, reaching about 16.5 million U.S. TV households. The stations will include 11 CBS affiliates, nine NBC affiliates, seven ABC outlets and one Fox affiliate.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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