Scripps-LIN: The deal undone

Scripps bows out, perhaps waiting for options after changes in cross-ownership rules
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Scripps Howard Broadcasting and Hicks Muse-controlled LIN Television came within a hair's breath of announcing their merger two weeks ago, but Scripps called it off at the last minute, according to sources with knowledge of the talks.

Multiple sources said last week that Scripps got cold feet after the FCC let it be known that it would probably ease the cross-ownership rules between newspaper publishers and broadcasters.

As a result, top executives at Scripps decided they would be better off stepping back and exploring other options with publisher broadcasters like Belo, Hearst, Gannett and Tribune. Sources also said that "cultural issues" between the two companies probably played a role in the deal's collapse.

Had the deal gone through, it would have been the 14th-ranked TV group covering about 14.6% of the U.S.

The terms of the deal called for Scripps to buy control of LIN, with the television assets of both spun off into a new publicly traded television company. Scripps would have been the majority partner, although LIN Television President Gary Chapman would have run the company as chief executive officer. Hicks Muse would have retained a minority interest in the new company. Sources said an issue for Chapman was where the new company would be based. He wanted to remain in Providence where LIN is based. Scripps is based in Cincinnati and wanted him to relocate.

Analysts currently value LIN in excess of $1.1 billion. Hicks bought LIN in 1998 for $1.8 billion, but then spun off 80% of KXAS-TV Dallas to NBC. LIN had $224 million in 1999 TV revenue, with pre-tax operating income of $94 million.

Scripps Howard Broadcasting, like many broadcasters, had a down year in 1999. Operating income was down 28% to $67 million on a 6% revenue drop to $312 million. Earlier this year, it reshuffled its TV management ranks, shifting Frank Gardner to new media to develop the company's Web-related activities. Jim Hart retains oversight of the TV group, now reporting directly to top management.

Both Hicks and Scripps have been shopping around their TV properties for some time. "All the major players have looked at both properties," says one station broker familiar with the talks. ABC reportedly talked to Scripps about its TV stations after conversations to buy the Allbritton TV group didn't pan out.

Hicks Muse at one time had wanted to create a huge TV-radio-outdoor media company in the Clear Channel or CBS mold. But the plan failed, and Hicks sold its radio-outdoor group, AMFM, to Clear Channel.

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