Scripps Splits in Two - Broadcasting & Cable

Scripps Splits in Two

Scripps Networks Interactive to Include Cable Networks, E-Commerce Sites; E.W. Scripps Co. to Contain TV Stations, Newspapers
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E.W. Scripps is planning to split into two publicly traded companies, one focused on “national lifestyle-media brands,” such as cable networks, and the other comprised of TV stations and newspapers. They’ll be known respectively as Scripps Networks Interactive and E.W. Scripps Co.

The Scripps board of directors voted unanimously on the plan.

Scripps Networks Interactive will include Home & Garden Television, Food Network and DIY Network, among others, along with e-commerce sites Shopzilla and uSwitch. It’s anticipated that Scripps president and CEO Kenneth Lowe will head up that wing.

E.W. Scripps Co. will be made up of community newspapers and the company’s 10 TV stations, including six ABC and three NBC outlets. That half will also include Scripps Media Center, which includes Scripps Howard News Service. Executive vice president and chief operating officer Richard Boehne is expected to be president and CEO of E.W. Scripps Co.

“This is an important and logical next step for our shareholders, employees and all other stakeholders who have a direct interest in the success of our media businesses,” Lowe said. “It’s our intention to create two publicly traded companies, each with a strategic focus that would foster continued growth, solid operating performance and a clear vision on how best to build on the specific strengths of our national and local media franchises.”

The split comes on the heels of Belo announcing that it was dividing into two halves, although that bifurcation involved putting newspapers and TV stations in separate companies. Several media companies are contemplating whether they’re better of as a whole or divided into parts.

In a research note Tuesday morning, Wachovia Capital Markets applauded the move as a value-enhancing transaction, noting that “the networks should garner a substantial multiple once unencumbered from newspapers.”

That said, Wachovia expects the stock to trade on a “sum-of-the-parts” basis post-announcement, which it values in the $52-$54 range. That implies a multiple of 10.1 times the 2008 estimate earnings before interest, taxes, depreciation and amortization (EBITDA) of $863 million. The 2008 EBITDA for cable and interactive is estimated at $674 million and for the newspapers and broadcasting at $246 million.

The company’s stock was up over 6.8%, to around $45.20 per share, in early afternoon trading Tuesday after hitting a high of $46.35 earlier in the session.

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