By ERIK HOLM And CHRISTOPHER S. STEWART

Two years after Warren Buffett warned about a dire future for most of the print media, the billionaire investor's company agreed to buy the publisher of his hometown newspaper.

Berkshire Hathaway Inc. on Wednesday struck a deal to buy Omaha World-Herald Co., the publisher of the Omaha World-Herald and six other daily papers in Nebraska and Iowa. The transaction was valued at around $200 million and includes about $50 million of the newspaper company's debt, a person close to the deal said.

Berkshire, where Mr. Buffett is chairman and chief executive, already owns the Buffalo (N.Y.) News and is a major shareholder in Washington Post Co., which publishes the fifth-biggest U.S. paper by daily circulation. In a statement, Mr. Buffett said the World-Herald "delivers solid profits."

Still, the purchase, which comes at a time when Berkshire's performance and the 81-year-old Mr. Buffett's succession plans are a focal point on Wall Street, doesn't appear to follow the company's deal-making template.

Jeff Matthews, a Berkshire shareholder and author of a book on Mr. Buffett, said the acquisition didn't meet the investor's usual criteria. "He wants enduring franchises, he wants competitive advantages and he doesn't like newspapers in general," Mr. Matthews said. "It doesn't fit any of the things he says he wants."

Through an assistant, Mr. Buffett declined to comment beyond his company's statement.

Mr. Buffett's track record has been built on successful investments in insurers, financial companies and industrial businesses, including household names like Coca-Cola Co. and American Express Co. And his company's recent acquisitions, like the $26 billion purchase of Burlington Northern Santa Fe or the $9 billion deal for Lubrizol Corp., have been large.

Berkshire shares are down 1.6% this year, compared with a 4% gain in the Dow Jones Industrial Average.

Mr. Buffett's interest in the news stretches back to his childhood. He began building his fortune as a teenager by delivering the Washington Post in wealthy neighborhoods around Washington, D.C. Later, he purchased a now-defunct Omaha weekly that would win a Pulitzer Prize in 1973 for an exposé on Boys Town, a refuge for homeless boys. Mr. Buffett had conceived the story and was actively involved in the reporting, according to Mr. Buffett's biographer Alice Schroeder. Mr. Buffett also developed a close friendship with the late Post publisher Katharine Graham.

Mr. Buffett said the deal will continue local ownership of the company, currently 80%-owned by employees and 20%-owned by the Pieter Kiewit Foundation, an Omaha-based charitable trust formed by the estate of a former World-Herald owner.

"It's his hometown paper so he probably wants to see it preserved," said Ken Doctor, a news industry analyst and author of the book Newsonomics. Mr. Buffett grew up primarily in Omaha and continues to run Berkshire, the eighth-most-valuable U.S.-traded company by market capitalization, from an office there.

Berkshire at points in the 1970s held shares in Scripps Howard, Booth Newspapers, Harte-Hanks Communications and Affiliated Publications, then the owner of the Boston Globe. In 1985, Mr. Buffett invested $517 million for a 15% stake in Capital Cities to help it buy ABC, a stake Berkshire kept until Capital Cities sold itself to Walt Disney Co. in 1996 for $19 billion.

More recently, Mr. Buffett has expressed doubts about the newspaper business. At Berkshire Hathaway's annual meeting in the spring of 2009, he said, "For most newspapers in the United States, we would not buy them at any price." Referring to economic challenges such as declining readership and weak advertising revenue, he warned that eroding readership means many papers face "the possibility of nearly unending losses."

The industry's difficult economics have been evident at times at the World-Herald. Like many in the industry, the paper—which says it is the 49th biggest U.S. daily and that it has the seventh-highest daily penetration among major papers—has struggled with declining circulation. Weekday circulation has fallen 24% since 2006 to a recent 135,282, while Sunday circulation has declined to 170,381, from 228,344 five years ago. In response, the company has cut staff and slashed costs, including a 5% pay cut in 2009.

"We made some hard choices, like a lot of businesses," Terry Kroeger, CEO of the World-Herald, said in an interview Wednesday. He said Mr. Buffett said at a meeting Wednesday morning that he "wants us to continue to operate as we have—to keep running a solid newspaper and doing the work we've been doing."

Many newspapers have tried to expand their reach with readers and advertisers by building substantial online presences. But few have successfully charged for content, a challenge Mr. Buffett seems likely to take up. He said at Wednesday's meeting announcing his company's purchase of the World-Herald that newspapers need to quit giving away their product at no charge.

Jeff Bercovici, Forbes Staff

I cover media, technology and the intersection of the two.

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11/30/2011 @ 4:37下午 |4,188 views

Warren Buffett Is Betting That Newspapers Have a Future

That thumping sound you just heard? That was the newspaper industry touching bottom. At least that’s what it sounded like to uber-investor Warren Buffett, who just bought a newspaper company that publishes his hometown daily, the Omaha World-Herald, along with a basket of other daily and weekly regional titles.

The Berkshire Hathaway CEO has amassed a $39 billion fortune in large part by recognizing and capitalizing on the hysterical overreaction of other investors, both positive and negative. His world-famous formulation: Be fearful when others are greedy and greedy when others are fearful.

By 2008, the newspaper industry’s long slide hadn’t yet tipped over into an all-out plummet and many were hopeful it never would, including Rupert Murdoch, who had just bought The Wall Street Journal for $5 billion. Buffett, however, was already plenty fearful. Though Berkshire held investments in newspapers including the Washington Post Co. and the Buffalo News, he cautioned others to keep their distance, saying most companies “have the possibility of going to just unending losses.”

So what’s changed? Well, plenty. For one thing, paywall experiments like the one at The New York Times Co. have started to bear fruit, showing that there might be a workable economic model for papers in the age of digital distribution. Moreover, not to put too fine a point on it, newspaper stocks have just gotten an awful lot cheaper. While the price of the World-Herald was not disclosed, Berkshire shareholder and Buffett chronicler Jeff Matthews says it “probably cost next to nothing.” And it “delivers solid profits and is one of the best-run papers in America,” according to Berkshire.

Be that as it may, it’s clear there were considerations at play here beyond cold-eyed capitalism. Buying the World-Herald allows Buffett to perform a civic service for the city he’s lived in his entire life by ensuring it will continue to have a locally-owned, editorially-independent newspaper for the foreseeable future. At a time when even big cities are contemplating a newspaper-less future, that’s a big gift to give. Leave it to Buffett to find a way to give back while getting richer.