In the end, Warren Buffett decided it would be better to be a TV-station owner than a cable mogul.
Buffett’s Berkshire Hathaway has cut a deal to acquire Miami TV station WPLG, valued at $364 million; Berkshire shares worth $400.3 million and $327.7 million in cash in return for Buffett’s $1.2 billion interest in Graham Holdings, the former Washington Post Co.
When Graham Holdings said it was negotiating to buy Berkshire’s stake, it discussed the possibility of trading some assets — including its cable operation, Cable One — for the stock.
Berkshire wanted to exit in a tax-efficient way, having a low cost basis of about $11 million, and this deal’s structure appears to done the job.
The $1.2 billion value of the Graham stake limited what assets could be included in the spin-off. Based on conservative valuations for cable companies of seven times cash flow, Cable One is worth at least $2.1 billion.
Buffett was an early cable investor: Berkshire Hathaway bought an 8% stake in TCA Cable in 1999, a publicly traded small-market operator based in Tyler, Texas, that was sold to Cox Communications later in 1999 for $3.3 billion.
Buffett and Berkshire have quietly amassed a portfolio in multichannel TV over the past three years. Securities filings indicate Berkshire began buying shares in DirecTV (4.2 million shares) and Liberty Media (1.7 million shares) in 2011. The fund has since beefed up those positions to 36.5 million shares and 5.3 million shares, respectively.
Berkshire also owns about 7.6 million shares of Viacom stock, having started with a purchase in 2012 of 1.6 million shares.