Buffett Talks of Ending Graham Holdings Stake

Warren Buffett is currently in talks in order to exit his Graham Holdings Co. $1.1 billion investment. They are the previous publisher of the Washington Post, and Buffett has owned stock in this company for over 40 years.

Graham is considering swapping assets including one of their businesses, as well as a number of their shares of Berkshire Hathaway stock, we learned according to yesterday’s regulatory filings. If a deal is signed, the Omaha, Nebraska-based Berkshire Hathaway would then turn over its Graham stake.

Graham and Berkshire “have not agreed on any terms for such a transaction, and may not reach any such agreement,” we learn from the filing. Buffett’s company may even end up acquiring more shares of Graham if they do not come to an agreement, or it may sell its holdings altogether, said the company in the filing.

At this point, Buffett’s company owns 1.7 3 million shares of the former Washington Post publisher, which is roughly a 28% stake. Yesterday, the stock closed at $654.90 in New York. Graham’s current businesses include a number of cable and TV networks, as well as the Kaplan education unit.

“My first thought was it might involve TV broadcasting” assets, said International Value LLC manager Charles D Vaulx. He currently has shares in Graham Holdings, and also said that it’s much too early to assess the entirety of this deal. Buffett did not respond when seeking comments.

After selling the Washington Post to Amazon.com, Graham changed the company name from Washington Post Co. after the flagship newspaper was no longer a part of the business. Jeff Bezos, Amazon CEO, bought the newspaper last year and took over current employee pension obligations, and Graham is still responsible for the retired workers. According to a regulatory filing, Graham’s defined-benefit pension portfolio held $228.6 million worth of Berkshire Hathaway stock.

The Deal’s Structure

“No transaction will be consummated unless it is in the interest of both parties,” said Graham in a statement. The spokeswoman for Graham Holdings, Rima Calderon, chose not to comment any further. In the filing, Berkshire mentioned that the structure of the deal would be set up as a tax-free spinoff.

The 83-year-old Buffett bought his initial shares in the Washington Post in 1973 for about $11 million. When he announced leaving the publisher’s board of directors in 2011, he said that he would still advise management when needed. Later that year, he also mentioned that he would retain his stake in the company.

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

Warren Buffett was a long time friend and confidant of Katharine Graham, the former CEO and chairman of the Washington Post who passed on in 2001. This past May, he said that she was one of his role models and mentioned that she’s an example of a “super high-grade” woman who never thought she deserved praise.

Don Graham

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

The Graham Holdings shares have risen by 63% over the last year. Berkshire’s shares have risen 16% during that time.

This past December, Berkshire Hathaway announced a separate deal to swap equity portfolio shares for assets. During this transaction, Berkshire Hathaway would give up about $1.4 billion of Phillips 66 stock, and receive in exchange the oil refiners business that makes additives to move products through pipelines a lot more efficient by reducing the drag.