Warren Buffett Clearly A Logical Successor
To Pete Kiewit In World-Herald ‘Rescue’

For an Omaha native who spent more than half a century working for The Omaha World-Herald, it isn’t difficult to pick a subject for my column this week.

The subject, of course, is how the tradition of local ownership of Omaha’s daily newspaper was first extended through an 11th-hour rescue by the late Peter Kiewit 49 years ago and how the tradition—not of local ownership now but of continuing local control—is being saved this month by another extraordinary native-born Omahan, Warren Buffett.

As Pete Kiewit did, Buffett believes ownership of The World-Herald is a good business investment but, even more importantly, a basic community asset whose management should continue to be controlled in Omaha.

Today, the details of Peter Kiewit’s struggle—it was indeed a struggle—to keep ownership of The World-Herald in Omaha—details interesting and important which have not been included in stories understandably concentrating on the start of the latest chapter—the Warren Buffett chapter—in the story of how local control of The World-Herald has been preserved for 126 years.

Pete Kiewit’s decision was by far harder to implement, because another leading Omahan—W. Dale Clark, retired chairman of the Omaha National Bank and at the time chairman of The World-Herald board—was determined to consummate a secretly-negotiated deal to sell the newspaper to the Newhouse newspaper chain headquartered in New York City.

Kiewit Faced Tough Job But No Financial Challenge

It should be acknowledged that Pete Kiewit did not face a major question which Warren Buffett has had to address.  In Kiewit’s day, The World-Herald was without question a good investment, with solid circulation, good profits and good prospects for continued growth.

Buffett’s decision, on the other hand, while greeted with enthusiasm by the public, The World-Herald board of directors and trustees of the Peter Kiewit Foundation, represents an investment in a newspaper whose profits have declined at a time when prospects for daily newspapers are generally considered to be questionable if not negative.  (Lee Enterprises, absentee owner of the Lincoln, Nebraska Journal-Star and a number of other dailies, has just announced bankruptcy.)

But Buffett and other Omahans (including me) enthusiastic about his decision believe that The World-Herald is a quality paper with reasonable prospects for continuing to be profitable and with the important advantage of being controlled in the community of publication—a true hometown newspaper.  And The World-Herald is working hard to “monetize” the increasing number of electronic ways it delivers information and advertising.

Let’s turn to the essential details of the half-century-ago struggle between two leading Omahans—Pete Kiewit, chief executive of the Peter Kiewit Sons construction company, and Dale Clark, retired chairman of the Omaha National Bank—over the future ownership of The World-Herald—a struggle which began and ended late in 1962.

Clark, whose wife had died, had married Kay Doorly Young, a Hitchcock granddaughter and widow of Dr. Richard Young.  Clark agreed to requests from Hitchcock heirs to serve as chairman of a board whose members’ holdings of inherited World-Herald stock gave them voices—sometimes conflicting voices—in how The World-Herald managed its affairs.

Clark Was Said To Be Weary Of Peacekeeper Role

It was widely understood that Clark wearied of being caught in the occasional crossfire and—conscientiously but very mistakenly in the opinion of Omahans generally and World-Herald staff members specifically—concluded that it was best that the newspaper ownership be sold.

So when Clark was approached by Sam Newhouse, head of the New York-based Newhouse chain of newspapers, about selling The World-Herald to Newhouse, Clark was receptive.  The result was an agreement between Clark and Newhouse to the effect that Clark would recommend that The World-Herald board of directors vote to sell the paper to Newhouse.

The deal might have been pulled off in secrecy if news had not somehow leaked out so that The Wall Street Journal could report the “secret” deal in a front-page story.

There were widespread expressions of alarm in Omaha.  The newspaper staff was unhappy, including publisher Walter Christenson and executive editor Fred Ware and a number of other executives.  (I was assistant to the president at the time and unhappy like every other World-Herald staff member I talked to and every other Omahan I talked to.)

The prospect of losing local ownership very seriously concerned a number of Omaha civic leaders.  John Merriam, chairman of the Northern Natural Gas Company, raised the subject at a meeting of that company’s executive committee, of which Pete Kiewit was a member.  There was discussion whether Northern Natural should buy the paper.  The decision was against it, but Pete indicated he would pursue the matter on behalf of the Peter Kiewit Sons’ company.

Mallory Kountze of Omaha—nephew of Hitchcock’s widow Martha who resided in Washington where she had lived with Senator Hitchcock before his death—had succeeded in delaying World-Herald board action.  (Hitchcock’s widow was firmly opposed to the sale to Newhouse, and she owned 26% of The World-Herald stock.)

Kiewit Turned Down In First Approach To Clark

The delay in action by The World-Herald board gave Pete Kiewit time to call on Dale Clark and ask to see The World-Herald’s financial statements because he was interested in possibly submitting a bid higher than that of Newhouse.  Clark refused, despite the fact that he and Pete Kiewit had been longtime friends.  Clark felt that he had a “gentleman’s agreement” with Newhouse that required him to push for World-Herald board approval of the Newhouse offer.

With decision day close at hand, another Omaha business leader, Robert H. Storz, who was both a close friend of Pete Kiewit and also concerned about the sale of The World-Herald outside the community, obtained a copy of The World-Herald’s financial records for the years 1959, 1960 and 1961 and projected figures for 1962, from Varro Rhodes, trustee for Mrs. Hitchcock’s investments.

Rhodes had obtained the figures from attorney Tyler Gaines, who represented Mallory Kountze and his and his aunt’s interests.  Gaines made the figures available to fellow attorney Rhodes who made them available to Bob Storz.

Second Approach Successful;
Clark Had Learned Of Community Opposition

Informed that the figures were available, Pete asked Storz to turn the figures over to Peat, Marwick, Mitchell, an Omaha accounting firm headed by John Becker, another member of the Omaha civic leadership team.

Peat Marwick attorneys went to work on a Saturday and quickly reported that The World-Herald was in excellent financial condition—profitable, with a healthy cash surplus and ownership of the KETV Channel 7 television station, a downtown office building and a large tract of undeveloped land at 132nd & Dodge Streets.

Storz called Pete Kiewit, who was on a weekend visit with wife Evelyn to her ranch in Wyoming.  Pete cut the Wyoming visit short and arranged to meet Dale Clark the next morning.  Pete informed Clark that he had the financial figures and wanted to make a bid for ownership.

Kiewit and Clark met again the next day.  Also present was Homer Scott, one of several Pete Kiewit Sons board  members who he had flown to Omaha to be consulted as to whether PKS should purchase the newspaper.  On that Monday, Kiewit and Scott met with Clark and offered $184 a share for World-Herald stock—.75 cents a share more than Newhouse had offered.

Clark said this was not enough to override the Newhouse offer of $183.25 a share.  Kiewit raised his figure to $185 a share.

Clark said he would take Pete Kiewit’s offer to the board the next morning, Tuesday, October 30, 1962.  The board quickly accepted the Kiewit bid.

Although the offer for Peter Kiewit Sons to purchase The World-Herald was, at $40,488.915, only $483,004 more than the Newhouse figure which Clark had earlier accepted, Clark was obviously relieved.  He had badly misjudged the reaction of the community and World-Herald staff if the paper were sold to Newhouse.

Whoever leaked the story to the Wall Street Journal had done a great favor to the Omaha community and ultimately to W. Dale Clark.

I’ve unloaded a good deal of detail on you, but it seems to me appropriate at this time to recall the story of Pete Kiewit’s successful fight to preserve local ownership of The World-Herald 49 years ago.

I hope this detailing will also correct an unintentional misrepresentation of Clark’s role as reported in The World-Herald’s 125th anniversary edition in August, 2010.  That special edition incorrectly described Clark’s role in the 1962 transfer of ownership, describing him as a helpful middleman from the start of negotiations.

The details of Clark’s real role—and his belated conversion—and all the other details which I have shared with you are recorded in two places—the excellent “A Century of Service” booklet published in 1985 and in a book-length Peter Kiewit biography.  Both were meticulously and interestingly written by the late Hollis J. Limprecht, who served The World-Herald so well in a variety of roles, including editorship of the World-Herald Magazine of the Midlands.

* * *

New Ownership Answer After 32 Years
Would Not Surprise Kiewit, As I See It

People have asked me whether I think Pete Kiewit would have approved of the transition to Warren Buffett’s control to replace Pete’s carefully-constructed plan for continuing employee ownership.

My reply is that I, of course, have no way of knowing, but my opinion is that, if representatives of World-Herald management and the Peter Kiewit Foundation believe such a change in control is necessary, it is a decision consistent with Pete’s hope for continued local control of “the local daily.”

My opinion is based in part on the fact that Pete had a great deal of respect for Warren, as certainly Warren had for Pete.  My opinion is based also on a conversation with Pete in the mid-1970s in a hotel room in Washington during the afternoon before the annual Gridiron Dinner, an annual event which Pete enjoyed attending from time to time.

Pete and I were involved in planning the acceleration of employee ownership, an acceleration which would start after his death.  I remember very clearly Pete saying that, whether it’s a plan for future newspaper ownership or any other purpose, you can’t count on more than 25 years of successful implemental of that plan after your death.  And Pete’s employee-ownership plan has lasted 32 years.

A good deal of credit for the transition to control by Warren Buffett goes to Walter Scott, a successor to Pete Kiewit as chief executive of the Peter Kiewit Sons company and a member of The World-Herald board of directors for some years.

Mogens Bay, a member of the board of the Peter Kiewit Foundation, and Scott were discussing the problem facing The World-Herald—not enough money to buy out employee shareholders when they wanted to sell, on retirement or for whatever reason.

Scott said he would discuss the matter with Warren Buffett, on whose Berkshire Hathaway board Scott serves.  The word came back to Bay that it would be well for World-Herald representatives to take their problem to Buffett.  The result is the much-publicized proposal, subject to approval by World-Herald shareholders later this month, to sell The World-Herald Company to Berkshire Hathaway, headquartered in Omaha.

To turn to Buffett was clearly a logical course.  He had served on The World-Herald board, he had arranged Berkshire Hathaway’s purchase of The Buffalo News, he was the principal non-family shareholder in the Washington Post and he had owned the Sun Weekly newspapers in Omaha.  His interest in newspapers and their ownership has long been well known.  So it was logical as well as fortunate that Walter Scott stepped forward to steer World-Herald management in the direction so apparently likely to be productive.

* * *

Careful Where You Aim, Mr. Columnist

How to describe today’s column-ender?  Be careful to avoid collateral damage?  Be careful where you aim?  A brief story of unintended consequences?

In any case, here’s what happened:

World-Herald sports columnist Lee Barfknecht recently recalled that Nebraska Cornhusker head coach Bo Pelini at an August booster even had said:  “We’re not playing around here for second place.  Our coaches should be expected to win.”

By November, Barfknecht suggested, Pelini was singing a different tune after the Cornhuskers had been eliminated from Big 10 title contention.  The headline caught the spirit of Barfknecht’s comments, suggesting that Pelini’s “summer words sting” come November.

(Did Barfknecht expect Pelini to suggest the Huskers wouldn’t be shooting for the championship?)

Is it possible that Barfknecht had not read—or had forgotten—that fellow World-Herald columnist Dirk Chatelain, in a full-page opinion piece on 2011 prospects for the 12 teams in the Big 10, had written early in 2011:

“Even if Bo Pelini solves his offense, there are too many tough tests to think about a national title.  This division (the Legends Division in the Big 10) is winnable even for a flawed team.  Look for Nebraska to earn a December 3 date with either Ohio State or Wisconsin.”

On December 3, of course, the Big 10 championship was decided by Wisconsin’s victory over Michigan State (a team the Huskers had decisively defeated, 24-3).

Does the recalling of Chatelain’s early 2011 prediction make him a victim of “collateral damage” or “unintended consequences”?

Let’s settle for calling it “a double dose of embarrassment” that “stung” two columnists.

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