CINCINNATI - The E.W. Scripps Co. will say goodbye to newspapers and hello to radio in a merger and spinoff transaction that will make the Cincinnati-based media company the fifth largest independent television group in the nation.
The deal calls for Milwaukee, Wisconsin–based Journal Communications Inc., the parent company of the Milwaukee Journal Sentinel, to merge its 13 television stations and 35 radio stations into Scripps. Both companies will spin off their newspapers assets into a new publicly-traded company, Journal Media Group.
The deal is subject to the approval of shareholders and regulators. It is expected to close in 2015.
Scripps would emerge from the deal with 4,000 employees and more than $800 million in annual revenue. The newspaper company would be based in Milwaukee, employ about 3,600 and generate annual revenue of more than $500 million.
The boards of both companies have approved the transaction. The Scripps family has agreed to relinquish its 130-year control of Scripps newspapers as part of the deal.
Scripps CEO Richard Boehne said the split should enable both companies to grow their respective media platforms through acquisitions and capital investments. Journal Media Group will emerge from the deal with no debt and Scripps would retain pension liabilities for its current newspaper employees. Scripps will have less debt than its peers in the broadcasting industry.
“It’s a big opportunity for Scripps and Scripps shareholders,” Boehne said. “It makes us a much larger television company, a much larger digital company and we also get back into the radio business. We’ll be financially a much bigger and stronger company.”
The leader of Scripps’ newspaper division, Tim Stautberg, will be the CEO of newly formed newspaper company, while Journals Communications CEO Steve Smith will be its non-executive chairman.
Stautberg said the company will be a “focused local media business with a print tradition” that will have the ability to expand beyond its 13-city footprint following the merger.
“I think it’s Scripps' way of giving its newspapers the best opportunity to enter a new chapter of their life, free of debt, free of substantially all of the pension obligations,” Stautberg said.
On the broadcast side, Scripps will be a “coast-to-coast news organization” with 34 television stations in 24 cities that reach 18 percent of U.S. households, said Brian Lawlor, Scripps senior vice president of television. It will own 35 radio stations in eight cities, including five markets with TV and radio combos.
“It will allow us to really tell the stories of what’s impacting America on a national scale,” said Lawlor. “Many of our digital investments … we’ll be able to scale those across almost 20 percent of the country. That creates a great business opportunity.”
Boehne, a former business reporter for the Cincinnati Post, said the decision to exit newspapers was “enormously difficult” because of the company’s deep history in the industry, but he thinks it is a business that “deserves scale and needs size” in order to grow. Edward W. Scripps founded the company as the Penny Press of Cleveland in 1878. A family trust, created in 1922, required the company to remain in the newspaper business until the death of the founder’s grandchildren. The trust expired with the 2012 death of Richard P. Scripps in Texas.
“We thought it was time to take the newspapers and put them into a dedicated company so they could grow and pursue their own strategy and take advantage of opportunities that they couldn’t do inside this company,” Boehne said.
For Scripps shareholders the deal will bring a one-time dividend of $60 million, or roughly $1 per share. It will be a tax-free transaction that makes shareholders of both companies owners of the surviving entities. Scripps shareholders will own 59 percent of the newspaper company following the transaction and 59 percent of the post-merger broadcast company.
The companies expect to gain about $35 million in “combined transaction synergies,” but Boehne said it will take months to determine whether any employees will lose their jobs or be asked to relocate. Scripps has about 270 employees at its Cincinnati corporate headquarters.
The Scripps National Spelling Bee and the Scripps Howard Foundation will remain with the Cincinnati-based broadcasting company.