Media General Inc. (MEG: Quote) on Thursday said it has agreed to sell all its newspapers, except the Tampa group, to BH Media Group, a unit of Warren Buffett's Berkshire Hathaway Inc. (BRK.A and BRK.B) for $142 million in cash.
Media General had said in February that it is exploring a potential sale of its printed newspaper operations. The shares are currently surging over 58 percent in pre-market trading.
The newspapers being sold include 63 daily and weekly titles in Virginia, North Carolina, South Carolina and Alabama, apart from digital assets, including websites and mobile and tablet applications. The newspapers also have a substantial commercial printing business. Media General is in talks with other prospective buyers for its Tampa print assets.
Warren Buffett, chairman of Berkshire Hathaway, said, "In towns and cities where there is a strong sense of community, there is no more important institution than the local paper. The many locales served by the newspapers we are acquiring fall firmly in this mold and we are delighted they have found a permanent home with Berkshire Hathaway."
The Media General newspapers will be part of BH Media Group, along with the Omaha World-Herald Company newspapers. World Media Enterprises, Inc., a sister company of the Omaha World-Herald, will manage the Media General newspapers.
Marshall Morton, CEO of Media General, said, "This single transaction for virtually all of our newspapers accelerates the timing of our strategy to focus on our broadcast television business and its future growth opportunities, including digital content and Mobile DTV."
The transaction is expected to close on June 25. After transaction fees and retaining $25 million in cash, Media General will use the remaining proceeds to repay existing senior secured notes.
As per another credit agreement, Berkshire will provide Media General with a $400 million term loan and a $45 million revolving credit line. The new loan will be used to repay the company's existing bank debt due March 2013 and will mature in May 2020. The new credit agreement is expected to be closed by May 24.
Media General will also issue Berkshire penny warrants for around 4.6 million Class A shares, which represents 19.9 percent of Media General's existing shares outstanding. In addition, Berkshire has the option to nominate a director to Media General's Board of Directors.
MEG, which closed at $3.14 on Wednesday, are surging 58.28 percent in pre-market activity.
BRK-A settled at $121,800, up from the prior close of $121,425, on 49,900 shares.
by RTT Staff Writer
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