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Comment by markerdmann | Hacker News Reader

This page has some interesting commentary on the purchase:

http://www.businessweek.com/articles/2012-05-17/why-warren-b...

"As recently as six years ago, newspaper companies sold for more than 9 times Ebitda (earnings before interest, taxes, depreciation, and amortization). Bank of America Merrill Lynch’s Stephen Weiss writes today that Buffett’s company paid around 4 times Ebitda for the Media General assets."

I suppose you could say he's buying a very sick golden goose. He may not be able to save the goose, but at 4 times Ebitda he only needs to collect a few last eggs to get his money back. And who knows... maybe the goose can be saved.

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I'm not sure economics is the right angle. This is an (re)election year, and these newspapers are all in "Virginia, North Carolina, South Carolina, Alabama and Florida." Think what you want from that.

Eh, that's only two and a half swing states (Actually, NC is probably less than a half swing state). If he was trying to influence the election, it'd be more efficient to fund a super pac. Priorities USA would be the obvious choice.

Buffett is a hands off manager, and if he started tinkering with editorial policies, word would get around. He's no Murdoch.

The non-obvious thing is that if 6 years ago Ebitda was '100' and today it is around '10' then Mr. Buffet would have paid 40 rather than 900. Comparing the Ebitda makes you think the cost was 45% of 6 years ago, but if Ebitda has fallen in this period then, as in my example, the price is just 4.5% of 6 years ago.

If these businesses are able to survive the next few years and get to grips with all the new mediums of publication then Ebitda may well return to the levels of 6 years ago and then Mr. buffet would be sitting very pretty indeed.

Does anyone have the comparative Ebitda figures?

That's a good point. Worst case, in 9 months I'm sure we'll see the details in the shareholder's letters (http://www.berkshirehathaway.com/letters/letters.html).

Value investing: the last few puffs in the cigar butt. http://www.valuebull.com/Cigar+Butts

Hopefully (for Buffett), it will turn out better than that famous example where he bought into a business in a declining industry (textiles).

http://en.wikipedia.org/wiki/Berkshire_Hathaway#History

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