Scripps Plans to Split Up TV, Newspapers
By Mike Farrell -- Multichannel News, 10/21/2007 6:00:00 PM MT
E.W. Scripps, the Cincinnati-based parent of cable networks HGTV and Food Network, has proposed splitting the company in two.
The two entities will be: Scripps Networks Interactive, consisting of cable networks and their related Web sites, and E.W. Scripps Co., consisting of television stations and newspapers in 17 markets.
The split will take the form of a tax-free dividend of stock in Scripps Networks Interactive distributed to all Scripps shareholders on a pro rata basis. The separation is expected to be completed in the second quarter of 2008.
Current Scripps CEO Ken Lowe will head up Scripps Networks Interactive and Scripps chief operating officer Rich Boehne will become CEO of E.W. Scripps.
The deal allows Scripps to separate its high-growth cable networks from its declining newspaper assets. According to Scripps financial data, newspaper revenue has been declining at a steady clip this year — it dipped 8.9% in the second quarter and 7.8% in the first quarter.
Meanwhile, its established cable networks like HGTV and Food have been thriving, with revenue up 4.8% in the second quarter and 10% in the first quarter.
The cable networks also have the advantage of being profit centers — segment profit at cable was $164 million, up 9.2% in the second quarter, while programming production costs are low.
According to SNL Kagan, it generally costs between $100,000 and $200,000 to produce an hour of programming for Scripps Networks. That's about one-fifth to one-tenth the cost to produce an hour of scripted programming for a general-interest cable network.
The announcement comes on the heels of another newspaper and television-station giant — Belo Corp. — plans to split its units in two. When Belo announced those plans earlier this month, the stock rose 19%.
While the transaction will give Scripps a pure cable currency with which to do deals, Lowe said on the call that at the moment, no big acquisitions are on the horizon. However, he added that the company would be interested in acquiring Tribune Co.'s 30% interest in Food Network at the right price. Scripps owns the remaining interest.
“We're always interested in obtaining that last piece of the Food Network, but at the right price,” Lowe said. “No current discussions are going on.”
| Scripps Schism | |
|---|---|
| E.W. Scripps has proposed splitting the company into two separate entities. Below is how each would look: | |
| Scripps Networks: | E.W. Scripps |
| SOURCE: E.W. Scripps |
|
| Headquarters: Cincinnati | Headquarters: Cincinnati |
| Employees: 2,100 | Employees: 7,100 |
| Annual revenue: $1.4 billion | Annual revenue: $1.1 billion |
| Assets: Cable networks HGTV; Food; DIY: Do It Yourself Network; Fine Living; and Great American Country; shopping services Shopzilla and uSwitch and their related Web sites. | Assets: 10 television stations; daily and community newspapers in 17 markets, including the Rocky Mountain News in Denver, the Memphis Commercial Appeal, and the Cincinnati Post; United Media; and Scripps Media Center, which includes the Scripps Howard News Service. |
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