Case | HBS Case Collection | June 2013 (Revised September 2014)

Buffett's Bid for Media General's Newspapers

by Benjamin C. Esty and Aldo Sesia

Abstract

On May 12, 2012, BH Media Group, a subsidiary of Warren Buffett's Berkshire Hathaway, announced an offer to buy Media General's (MEG) newspaper division for $142 million in cash and provide debt financing to the struggling firm. Reactions from investors and industry analysts varied greatly: one called it a "great surprise", another wondered if Buffett was investing with his heart rather than his head (he was a paperboy as a child), and a third said it was a "feat of financial engineering." Virtually all of them wondered what the "Oracle of Omaha" saw in the declining U.S. newspaper industry that others did not. The question facing Media General's CEO Marshall Morton was whether to accept the offer or not. As the head of a highly leveraged company whose revenues had fallen 31% in the past four years, whose stock price was down more than 90% off its high, and whose falling profitability left it perilously close to violating key debt covenants, he had to move quickly.

Keywords: valuation; Mergers & Acquisitions; bankruptcy; capital structure; Mergers and Acquisitions; Valuation; Capital Structure; Insolvency and Bankruptcy; Financial Strategy; Risk Management; Executive Compensation; Cash Flow; Business Exit or Shutdown; Media; Advertising; Restructuring; Media and Broadcasting Industry; Publishing Industry; United States;

Citation:

Esty, Benjamin C., and Aldo Sesia. "Buffett's Bid for Media General's Newspapers." Harvard Business School Case 213-142, June 2013. (Revised September 2014.)