E.W. Scripps, the Cincinnati-based parent of Cable networks HGTV and Food Network, has proposed splitting the company in two, one unit to house its television stations and newspapers, and the other its cable networks.
The two entities will be: Scripps Networks Interactive (consisting of 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) and E.W. Scripps Co. (consisting of 10 television stations, daily and community newspapers in 17 markets, United Media and Scripps Media Center, which includes the Scripps Howard News Service.
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.
According to the company, Scripps Networks Interactive will have about 2,100 employees and annual revenue of $1.4 billion. E.W. Scripps will have 7,100 employees and $1.1 billion in annual revenue.
Both companies will be headquartered in Cincinnati. 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.
In a conference call with analysts, Lowe said that the decision to cleave the company came after lengthy discussions with the board of directors and members of the Scripps family, which controls the company through the Scripps Trust.
“Right now it felt for us like the right timing based on rather lengthy process by the board and management in studying our options and our future growth potential,” Lowe said on the conference call. “And also our desire to align our businesses in a new way that focuses both our employees on our strategic initiatives going forward and further aligns them with the stakeholders and shareholders who would prefer to invest in these two types of companies.”
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%.
After the Belo announcement, speculation was high that other newspaper conglomerates would follow suit. Scripps stock responded in kind, rising 7.6% ($3.21 each) to $45.49 per share, in early trading Tuesday.
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,” Lowe said. “But at the right price. No current discussions are going on."