Amazon's Bezos to buy 'Washington Post' for $250M

• The deal ends four generations of ownership by the Graham family
• %27Washington Post%27 CEO Donald Graham cited mounting financial pressures
• The newspaper will not become part of online retailer Amazon.com

In a transaction rich in symbolism, digital billionaire Jeff Bezos, the founder and CEO of Amazon.com, has agreed to buy one of the nation's best and best-known legacy media publications, The Washington Post.

Bezos, who is paying $250 million in cash, is handling the deal individually, and the fabled newspaper will not be part of online retailer Amazon.com.

The sale comes against the backdrop of the digital revolution, which has transformed the way people consume news and profoundly disrupted the newspaper business.

In a letter to Washington Post staffers Monday addressing concerns in the newsroom over the sale of the family-owned newspaper, Bezos said, "The values of the Post do not need changing."

"The paper's duty will remain to its readers and not to the private interests of its owners," he wrote. "We will continue to follow the truth wherever it leads, and we'll work hard not to make mistakes. When we do, we will own up to them quickly and completely."

The company of another billionaire investor, Warren Buffett, will lose its stake in the Washington Post Co. and will get about $53.5 million from the sale, the Associated Press reported.

Buffett's firm, Berkshire Hathaway, owns 1.7 million shares of company stock and is the largest outside shareholder.

The Post became a journalistic icon for its role in uncovering the Watergate scandal, which brought down President Richard Nixon, an episode celebrated in the movie All the President's Men.

The deal brings an end to four generations of ownership by the Graham family — and also symbolizes how dramatically the newspaper industry is evolving. Newspaper revenue and circulation are shrinking as readers increasingly turn to digital media.

In turn, newspaper owners are experimenting with new circulation-boosting ideas, novel ad revenue models — and are open to selling off their struggling printed properties.

Last week, Red Sox principal owner John Henry reached an agreement to buy The Boston Globe from the New York Times Co. for $70 million.

Bezos is also buying a number of other properties in the Washington region, including the Express newspaper, The Gazette newspapers, Southern Maryland Newspapers, Fairfax County Times, El Tiempo Latino and Greater Washington Publishing.

Slate magazine, The Root and Foreign Policy are not part of the deal and will remain with The Washington Post Co.

The Washington Post Co., which also owns Kaplan, Post-Newsweek Stations and Cable ONE, said it will change its name.

Shares of The Washington Post Co. rose about 5% n after-hours trading to $597.50.

"Everyone at the Post Company and everyone in our family has always been proud of The Washington Post — of the newspaper we publish and of the people who write and produce it," said Donald Graham, chairman and CEO of The Washington Post Co. "I, along with [Post CEO and publisher] Katharine Weymouth and our board of directors, decided to sell only after years of familiar newspaper-industry challenges made us wonder if there might be another owner who would be better for the Post. Jeff Bezos' proven technology and business genius, his long-term approach and his personal decency make him a uniquely good new owner for the Post."

Several executives of the newspaper — Weymouth; Stephen Hills, president and general manager; Martin Baron, executive editor; and Fred Hiatt, editor of the editorial page — will continue their roles after the transaction, the company says.

The purchase price will be payable at closing later this year.

For now, the company will retain its interest in certain real estate assets, including the headquarters building in downtown Washington, D.C. Earlier this year, Weymouth told staffers that the company was looking to sell the headquarters building.

"We're seeing a lot of smart people buying newspapers," said John Miller, senior vice president and portfolio manager at the Ariel funds. "We saw [legendary investor and Berkshire Hathaway CEO Warren] Buffett buy 30 to 31 newspapers in the last two years, we saw The Boston Globe sold" to Henry.

"A lot of people had written off the industry, but we're seeing more transactions occurring," Miller said. "People view them as newspaper companies, but they are content providers, and we know content is valuable. People are buying these assets when they are out of favor. It's time to be an acquirer."

Ariel has about 2.6% of its $2.2 billion Ariel Fund assets in Washington Post Co. stock and 3.8% of its assets in Gannett, owner of USA TODAY.

As The Washington Post has developed a large digital audience and increasingly relies on its digital properties for revenue — it recently added a paywall — having a tech executive in charge may help the business chart a new course, said Rick Edmonds, a media analyst at The Poynter Institute.

"Having quite a lot of expertise in technology and technology enterprises, generally, plus being friendly with Don Graham, all those things may add up to making it real attractive to him," he said. "I think it is a good thing" for Post readers.

Bezos said he's known Graham for "10-plus years."

The deal underscores a new industry trend of "white knights" - deep-pocketed individuals - buying newspapers for more direct control of content, says Ken Doctor, media analyst for information firm Outsell and author of Newsonomics. "I think we will see more of it," he says.

Without the glare of Wall Street, newspapers may have a better chance of surviving, even thriving, with private benefactors. "Newspapers are not the creatures of the public markets that they were," Doctor said, estimating The Washington Post is not a profitable newspaper.

In explaining to Post staffers why he sold the paper, Graham cited mounting financial pressures and a reluctance to further cut costs. "Our revenues had declined seven years in a row," he said in a note. "We had innovated and to my critical eye our innovations had been quite successful in audience and in quality, but they hadn't made up for the revenue decline. Our answer had to be cost cuts and we knew there was a limit to that."

The Washington Post Co. recently has shown efforts to diversify its business as publishing revenue continues to fall. In July, it agreed to buy Forney Corp., a supplier of combustion control equipment. Graham said the deal was pursued as "part of (its) ongoing strategy of investing in companies with demonstrated earnings potential."

Its newspaper publishing division revenue in the second quarter fell 1% year-over-year to $138.4 million. It made up 13.5% of the company's total revenue, down from about 26% in 2005. "You have one asset that is not doing well and is dragging down the stock price of the company," said long-time newspaper industry analyst John Morton.

Bezos is an ideal leader in ushering in the post-print era of newspapers, Doctor said. With his Kindle tablets and e-readers that have revolutionized the way we read published materials, Bezos now also has a strong content-publishing arm that he can use "to re-envision that reader experience," he said.

Bezos, while generally reluctant to grant interviews, has been quietly active in public policy. And he stands to garner criticism if he misuses the newfound platform, Doctor said.

Last July, Bezos made headlines with his public support of same-sex unions. Late that month, Washington United for Marriage -- a coalition that sought to uphold a gay marriage law that passed in Washington -- announced that Bezos and his wife Mackenzie would donate $2.5 million to its cause.

Bezos' acquisition took many Post watchers by surprise. "I just couldn't imagine it. I wonder if it would have happened if Kate Graham was alive, but we'll never know," Morton said, referring to the late publisher who oversaw the rise of the paper's prominence following the Watergate scandal.