Buffett in Talks to Exit Stake in Graham Holdings

Berkshire Hathaway CEO Warren Buffett
Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. Photographer: Scott Eells/Bloomberg

Warren Buffett is in talks to exit his $1.1 billion investment in Graham Holdings Co., the former publisher of the Washington Post, after owning the stock for more than four decades.

Graham may swap assets including a business, and possibly shares it holds in Buffett’s Berkshire Hathaway Inc., according to a regulatory filing yesterday. Omaha, Nebraska-based Berkshire would turn over its Graham stake if a deal is signed.

Berkshire and Graham “have not agreed on any terms for such a transaction, and may not reach any such agreement,” according to the filing. Buffett’s company may acquire additional shares in Graham if an agreement isn’t reached or could sell its holdings, Berkshire said in the filing.

Buffett’s company owns 1.73 million shares of Graham, a stake of about 28 percent. The stock closed at $654.90 yesterday in New York. Graham’s businesses include the Kaplan education unit, as well as television stations and a cable network.

“My first thought was it might involve TV-broadcasting” assets, said Charles De Vaulx, a manager at International Value LLC, which owns Graham Holdings shares, adding that it’s too early to completely assess the scope of a possible deal. Buffett didn’t return a message seeking comment.

Graham changed its name from Washington Post Co. after selling its flagship newspaper to Amazon.com Inc. Chief Executive Officer Jeff Bezos last year. Bezos assumed pension obligations of current employees while Graham still is responsible for retired workers. Graham’s defined-benefit pension plan portfolio held $228.6 million in Berkshire stock at the end of September, according to a regulatory filing.

Deal’s Structure

“No transaction will be consummated unless it is in the interest of both parties,” Graham Holdings said in a statement. Rima Calderon, a spokeswoman for Graham Holdings, declined to comment further. Berkshire said in the filing that a deal would be structured as a tax-free split-off.

Buffett, 83, purchased shares in the Post for about $11 million in 1973. In 2011, when he announced his departure from the publisher’s board, he pledged that he would be available to advise management. He said later that year that he intended to retain his stake.

“It was a fantastic investment from 1974 until whenever the Washington Post peaked,” said Bill Smead, who oversees Berkshire shares as chief investment officer of Smead Capital Management. “Now, that whole line of logic is completely different. They don’t own the newspaper.”

Buffett was a longtime confidant and friend of Katharine Graham, the former Post chairman and CEO who died in 2001. In May, he called her one of his role models and an example of a “super high-grade” woman who didn’t think she deserved praise.

Don Graham

The billionaire also is friends with Don Graham, Katharine Graham’s son and the CEO of Washington-based Graham Holdings, according to Alice Schroeder’s book, “The Snowball: Warren Buffett and the Business of Life.”

Graham Holdings shares surged 63 percent in the past 12 months. Berkshire climbed 16 percent in that period.

Berkshire announced in December a separate deal to swap shares in its equity portfolio for assets. In that transaction, Buffett’s company agreed to give up about $1.4 billion of stock in Phillips 66 in exchange for the oil refiner’s business that makes additives to move products through pipelines more efficiently by reducing drag.

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