How Warren Buffett Bought ESPN

ESPN is the crown jewel of The Walt Disney Co. (NYSE: DIS).
The sports cable network is estimated to be worth more than $80 billion. That high price tag equals roughly 40% of Disney’s entire $196 billion market capitalization.
Yet it may surprise you to learn that Warren Buffett was once the largest ESPN shareholder.
That’s because back in 1985, Buffett’s Berkshire Hathaway (NYSE: BRK-B) made a $517 million investment in a company called Capital Cities. Buffett’s investment was crucial in allowing Capital Cities to acquire the ABC television network.
With the investment, Berkshire Hathaway bought a 25% stake in Capital Cities/ABC. At the time, it was his largest investment and the biggest media deal in history. And by grabbing a stake in Capital Cities/ABC, Buffett also became the largest owner of the rapidly growing sports television station known as ESPN.
=======
Warren Buffett’s No. 1 Book – Yours Free
One little-known book reveals how one man turned $10,000 into $2.4 million. It’s No. 1 on Warren Buffett’s reading list – and he calls it “an outstanding book.” Now you can claim your hardcover copy – a $30 value – absolutely free.
Claim your book today – while supplies last. Click here now.
=======
With this investment, Buffett was making a big bet on Capital Cities CEO Tom Murphy. They’d met back in 1969, soon after Murphy had moved into the top spot. He went on to turn the local television station into a nationwide media powerhouse.
Capital Cities stock was a consistently strong performer. During Murphy’s 29 years as CEO, the stock delivered a compound annual return of 19.9%.
That’s impressive in absolute terms. It’s even more impressive when you consider that the stock outperformed the market by 16-to-1.

So what made Tom Murphy a huge success? It’s actually pretty simple.
First, Murphy was cost conscious. He didn’t fly first class and didn’t stay at the Ritz-Carlton. When he bought ABC in 1985, he sold the Manhattan headquarters for $175 million and got rid of the corporate jets. Murphy was focused on the bottom line, and was relentless in cutting costs wherever possible.
Second, he was a master at mergers and acquisitions. He loved buying media properties to expand Capital Cities. But he only bought companies when the price was right. He had the restraint to hold off when prices were high. And when he saw the opportunity to buy ABC at a bargain price, he pounced.
Murphy knew when to buy companies. And just as important – he knew when to sell. In 1995, he decided to cash out and sell Capital Cities/ABC to Michael Eisner’s Disney for $19 billion. At the time, it was the second most valuable corporate acquisition in history.
Since the acquisition, Disney stock has soared 528%. A large part of Disney’s success has been Capital Cities’ great portfolio of assets – including ESPN. That strong performance has beaten the S&P 500 by 2-to-1.
Tom Murphy has long since retired. He’s gone on to serve on the Berkshire Hathaway board of directors since 2003. At age 89, he’s Berkshire’s second oldest board member. But he’s in good company with Charlie Munger and Warren Buffett, respectively 91 and 85 years old. It reminds me of a great Buffett quote from the 2014 Berkshire shareholder letter, “It’s hard to teach a new dog old tricks.”
One little-known book reveals the secrets behind America’s best CEOs – including Tom Murphy and Warren Buffett. Using these lessons, you can learn how to invest alongside the top CEOs for the next decade.
I’m confident that this book can positively impact your investments. That’s why I’ve made a special arrangement with the publisher. For a limited time, I’m offering free copies of this book to Daily Profit readers.
Just click here to claim your free copy of this acclaimed book – while supplies last.