Latest TV Mega Deal Reverberates Here

In the latest TV Super Deal, Cleveland’s ABC affiliate will gain a bunch of sister TV stations, and even some sister radio stations.

E.W. Scripps Company, the Cincinnati-based owner of WEWS/5, announced a merger with Milwaukee-based Journal, which owns TV, radio and newspaper assets nationwide.

In the end, WEWS will remain a key piece of the new Scripps, which will focus on broadcast and digital while sending both companies’ newspapers to the new Milwaukee-based Journal Media Group.

From a Scripps release last night:

The E.W. Scripps Company, based in Cincinnati, will own and operate television and radio stations serving 27 markets and reaching 18 percent of U.S. television households. Scripps will be the fifth-largest independent TV group in the country.

Let’s roll out a press release quote from the top of Scripps, old and new:

“In one motion, we’re creating an industry-leading local television company and a financially flexible newspaper company with the capacity and vision to help lead the evolution of their respective industries,” said Rich Boehne, chairman, president and CEO of The E.W. Scripps Company, who will continue at the helm of Scripps. “Making the combinations even more appealing are the rich histories of these two organizations, both driven by a deep commitment to public service through enterprise journalism. For shareholders, this deal should unlock significant value as both companies gain efficiency, scale and more focus on the industry dynamics unique to these businesses.”

To us, it looks like Scripps was successful in shedding its newspaper assets from its broadcast and digital core. Scripps shareholders will still own nearly 60 percent of the print side, and nearly 70 percent of the broadcast side.

But in a move soon to be echoed by Tribune, owner of WJW/8 “Fox 8” here, the print assets are no longer mixed in with the broadcast side.

Scripps has been solely a broadcaster in Ohio for some time.

But its print roots run deep, with E.W. Scripps himself founding the “Penny Press” in the late 19th Century. That newspaper, the Cleveland Press, gave up the ghost in 1982 just two years after Scripps sold it off.

Scripps also shuttered the Columbus Citizen-Journal and, most recently, the Cincinnati Post. (That newspaper lives on in name only as the online Kentucky Post, thanks to Scripps’ WCPO/9 there.)

Radio-wise, Scripps put WEWS-FM/102.1 on the air…you know the radio station on that frequency now, of course, as CBS Radio AC WDOK/102.1.

The Scripps/Journal deal brings no new radio partners for WEWS.

In addition to its home market of Milwaukee, where Journal operates news/talk powerhouse WTMJ/620 and variety hits WLWK/94.5 “The Lake”, Journal owns stations in Boise ID, Knoxville TN, Omaha NE, Springfield MO, Tucson AZ, Tulsa OK, and Wichita KS.

Note that Milwaukee is by far Journal’s largest radio market.

And for the moment, we have no idea if Scripps intends to hold onto Journal’s radio stations long term, let alone add to that portfolio.

Talk about Scripps acquiring radio stations in Cleveland or in any other market would seem to be quite premature at this point, for those and other reasons.

And many have already parsed the quote from Scripps’ leader Rich Boehne above, noting that “radio” is not mentioned.

The full press release is reprinted below…

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Scripps, Journal merging broadcast operations, spinning off newspapers

Transaction will create two focused public companies, one built upon TV, the other newspapers

(NYSE: SSP)
For immediate release
Wed, July 30, 2014

Scripps, Journal merging broadcast operations, spinning off newspapers

Transaction will create two focused public companies, one built upon TV, the other newspapers
The spinoffs and mergers create two industry-focused companies positioned for success.

The E.W. Scripps Company, based in Cincinnati, will own and operate television and radio stations serving 27 markets and reaching 18 percent of U.S. television households. Scripps will be the fifth-largest independent TV group in the country.

Journal Media Group, a newly formed newspaper publishing entity, will be headquartered in Milwaukee and operate in 14 markets.

Scripps shareholders will own 69 percent of the combined broadcasting company and 59 percent of the newly formed Journal Media Group. Journal Communications shareholders will own 31 percent and 41 percent, respectively, of Scripps and Journal Media Group. Scripps shareholders also will receive a $60 million special cash dividend as part of the deal.

With strong balance sheets, both public companies will be well positioned to make further investments and acquisitions with expected net leverage of about 2x at closing for Scripps and no debt at Journal Media Group.

The transaction is expected to generate about $35 million in combined synergies, resulting in substantial long-term cost savings, and create long-term value for shareholders.

CINCINNATI and MILWAUKEE (July 30, 2014) – The E.W. Scripps Company (NYSE: SSP) and Journal Communications (NYSE: JRN) have agreed to merge their broadcast operations and spin off and then merge their newspapers, creating two focused and separately traded public companies that offer long-term opportunities to create value for shareholders.

The merged broadcast and digital media company, based in Cincinnati, will retain The E.W. Scripps Company name, and the Scripps family shareholders will continue to have voting control. The company will have approximately 4,000 employees across its television, radio and digital media operations and is expected to have annual revenue of more than $800 million.

The newspaper company will be called Journal Media Group and will combine Scripps’ daily newspapers, community publications and related digital products in 13 markets with Journal Communications’ Milwaukee Journal Sentinel, Wisconsin community publications and affiliated digital products. The company, with expected annual revenue of more than $500 million and approximately 3,600 employees, will be headquartered in Milwaukee.

The Scripps and Journal Communications boards of directors have approved the stock-for-stock transactions, which are subject to customary regulatory and shareholder approvals.

The deal is expected to close in 2015.

“In one motion, we’re creating an industry-leading local television company and a financially flexible newspaper company with the capacity and vision to help lead the evolution of their respective industries,” said Rich Boehne, chairman, president and CEO of The E.W. Scripps Company, who will continue at the helm of Scripps. “Making the combinations even more appealing are the rich histories of these two organizations, both driven by a deep commitment to public service through enterprise journalism. For shareholders, this deal should unlock significant value as both companies gain efficiency, scale and more focus on the industry dynamics unique to these businesses.”

“This transaction will create two solid media businesses that will continue to serve their communities with a commitment to integrity and excellence that has been built over many years,” said Steven J. Smith, chairman and CEO of Journal Communications. “Journal’s radio and television stations will add depth and breadth to the Scripps TV group and additional expertise to its management team. The formation of the new Journal Media Group, headquartered in Milwaukee, will continue a tradition of exceptional print and digital journalism in 14 markets across the country. These companies will offer a combination of excellent local media assets and an incredible array of talent in our employees. We look to the future with great optimism and a continued sense of purpose in providing relevant, differentiated content to our local communities across the country.”

Journal Communications’ Class A and Class B shareholders will receive 0.5176 Scripps Class A Common shares and 0.1950 shares in Journal Media Group for each Journal Communications share. Scripps shareholders will receive 0.2500 shares in Journal Media Group for each Class A Common Share and each Common Voting Share they hold in Scripps.

Journal Communications shareholders will own approximately 31 percent of The E.W. Scripps Company’s total shares following the merger. Scripps shareholders will retain approximately 69 percent ownership. The Scripps family will retain its controlling interest in The E.W. Scripps Company through its ownership of Common Voting shares. Scripps shareholders will own 59 percent of the new newspaper company, Journal Media Group, and Journal Communications shareholders will own 41 percent. Journal Media Group will have one class of stock and no controlling shareholder.

Scripps shareholders of record just prior to the closing will receive a $60 million special dividend.

The transaction is expected to be tax-free to shareholders of both companies.

The companies project about $35 million in combined transaction synergies in the near term.

Benefits for Scripps

The merger will create significant strategic and financial benefits for Scripps including:

Creating the opportunity for improving TV division margins;
Adding a profitable radio business;
Positioning the TV group in attractive markets across the country, including stations in eight important political states – Arizona, Colorado, Florida, Michigan, Missouri, Nevada, Ohio and Wisconsin;
Extending Scripps’ position as one of the largest owners of ABC-affiliated TV stations in the country by market reach, with 15 ABC affiliates, and expanding its affiliations to all of the Big Four networks;
Benefitting from co-ownership of TV and radio in five markets;
Leveraging high-quality journalism and Scripps’ original television programming across a larger geographic footprint; and
Maintaining a strong balance sheet, with expected net leverage at closing estimated at about 2x, allowing plenty of capacity for additional acquisitions.
The combination further leverages Scripps’ digital investments, adding large and attractive markets to the portfolio. The company is building and launching market-leading digital brands that serve growing digital media audiences in addition to supporting its on-air local news brands. It also recently acquired digital brands with national reach such as Newsy and DecodeDC that will benefit from the new geographic markets.

The Scripps National Spelling Bee will remain under the stewardship of The E.W. Scripps Company.

Benefits for Journal Media Group

The spinoff will create significant strategic and financial benefits for the combined newspaper operations, including:

Creating a powerful source of enterprise journalism and the opportunity for innovation in the industry;
Building upon a geographically diverse portfolio of strong local media brands in 14 attractive markets, including Naples, Fla.; Florida’s Treasure Coast; Knoxville; Memphis; and Milwaukee;
Leveraging best practices of each company across all functions to drive revenue growth, efficiency and cost effectiveness;
Increasing scale and financial flexibility, allowing Journal Media Group to navigate the ongoing transformation of the local media landscape; and
Establishing a solid balance sheet with $10 million of cash and no debt (Scripps is keeping substantially all qualified pension obligations).

Tim Stautberg, senior vice president, newspapers for Scripps, will become president, CEO and a director of Journal Media Group upon completion of the transaction. Steve Smith will become non-executive chairman of the board.

Wells Fargo Securities acted as exclusive financial advisor to Scripps, Evercore Partners acted as exclusive financial advisor to the Scripps family, and Methuselah Advisors acted as exclusive financial advisor to Journal Communications.