Dealmaking for broadcast stations continues to heat up with Sinclair reporting that it has built up a 8.2% stake in E.W. Scripps and that it has been talking to Scripps for several months about a possible deal.
In a filing with the Securities and Exchange Commission Sinclair indicated that it has acquired 6,275,204 shares of Scripps' Class A Common Stock, about 8.2% of all outstanding shares, and that it had “acquired the Class A Common Stock in contemplation of a possible combination with the issuer.”
Sinclair also noted that its board of directors, top executives and financial and legal advisors, “have engaged in constructive discussions” with Scripps “for several months regarding a potential combination of the two companies.”
Scripps operates a portfolio of more than 60 stations in 40 plus markets. It also owns Scripps News, Court TV, ION, Bounce, Grit, ION Mystery, ION Plus and Laff.
In the filing Sinclair said that “a combination offers both near- and long-term value creation for shareholders of each company. Based on prevailing trading multiples and more than $300 million in expected annual synergies estimated by the Reporting Person [Sinclair] based on public financial information, holders of the Issuer's common stock would receive an ownership stake in the combined company that the Reporting Person estimates would be worth approximately three times the average trading price of the Issuer's common stock over recent periods.”
Sinclair added that “the proposed combination would be structured to require no external financing as the combined company would maintain each company's respective debt and preferred capital structures. As a result, the transaction would avoid significant refinancing costs while meaningfully reducing the Issuer's leverage through the realization of synergies and lowering future refinancing risk.”
Sinclair and other broadcasters have been lobbying the Federal Communications Commission plans to relax ownership caps for broadcasters. In August Sinclair signaled its willingness to acquire stations with the announcement that it was embarking on a strategic review of its business.
“Scale wins in today’s broadcast industry, and we intend to lead that consolidation,” Chris Ripley, president and CEO of Sinclair, Inc. said in an August statement. “Our Broadcast business’s industry-leading performance positions us as the partner of choice for value creation. Simultaneously, we expect separating Ventures will crystallize significant value that the market has overlooked within our current structure, giving us even more flexibility to drive our broadcast strategy forward.”
“Recent industry consolidation and intensifying competition reinforce the Reporting Person's view that further scale in the broadcast television industry is essential to address secular headwinds and compete effectively with larger-scale big-tech and big-media players, as well as major broadcast groups,” Sinclair said in the Nov. 17 filing with the SEC. “Greater scale will also strengthen broadcasters' ability to sustain their vital public service role in producing local news. The Reporting Person believes combining with the Issuer provides the ability to compete successfully for advertising share, critical programming, and distribution economics through enhanced local and national scale, coupled with disciplined execution of synergies.”
The SEC filing is available here.
