Scripps, Journal Merger Results In Two New Companies

The deal follows a growing trend among media players to divide newspaper and broadcast assets into separate companies, according to jsonline.com.

"Everyone wins," said Steven J. Smith, chairman and chief executive officer of Journal Communications, who will serve as the nonexecutive chairman of Journal Media.

In addition to the Milwaukee Journal Sentinel, Journal Media will consist of all of Scripps' newspapers, including the Memphis Commercial Appeal, community publications and digital offerings. In all, the new company will operate daily newspapers in 14 markets.

The new company will have around 3,600 employees with expected annual revenue of some $500 million.

Timothy Statuberg

Journal Media will get a fresh financial start in an uncertain media world. The company's balance sheet will have $10 million in cash and no debt, while Scripps keeps substantially all of the qualified pension obligations.

Timothy E. Stautberg, who oversees Scripps' newspapers, will become CEO of Journal Media.

"I look forward to what we can build, leveraging the strengths of what we have today," Stautberg said.

Smith said everyone involved in the deal realized it was important to keep the headquarters of the new publishing company in Milwaukee.

"It's going to be a larger company than we have today with more employees than we have today," Smith said.

He added that he also was excited for the broadcast employees who currently work at Journal Communications.

"They are going to be part of a larger enterprise with even more resources to continue to serve their markets, and they'll have our people grow professionally," he said. "On both sides of this transaction we feel there is great value, great logic and a great cultural fit."

Scripps will emerge from the deal as the nation's fifth-largest independent TV group, with 34 stations. For the first time in years, it will re-enter the radio market, picking up Journal Communications' 35 stations.

All told, the company will serve 27 TV markets and reach 18% of the nation's households. Moreover, Scripps may become a key platform for political advertising with TV stations in eight battleground states: Arizona, Colorado, Florida, Michigan, Missouri, Nevada, Ohio and Wisconsin.

Richard Boehne

The merged broadcast and digital company will have 4,000 employees and anticipates annual revenue of more than $800 million. Compared to its peers, Scripps will have low leverage, with about two times EBITDA (earnings before interest, taxes, depreciation and amortization).

"I can't think of two station groups that fit together more easily with more clear upside than when you put these two together," said Richard A. Boehne, who will remain as board chairman, president and CEO of Scripps.

The deal, already approved by the boards of directors of both companies, is expected to close in 2015. The stock-for-stock transaction is anticipated to be tax-free for the companies' shareholders, who must approve the deal.

When completed, Scripps shareholders will own 69% of the broadcasting company and 59% of Journal Media Group.

Benefits for Scripps 

The merger will create significant strategic and financial benefits for Scripps including:

• Creating the opportunity for improving TV division margins;
• Adding a profitable radio business;
• Positioning the TV group in attractive markets across the country, including stations in eight important political states – Arizona, Colorado, Florida, Michigan, Missouri, Nevada, Ohio and Wisconsin;
• Extending Scripps’ position as one of the largest owners of ABC-affiliated TV stations in the country by market reach, with 15 ABC affiliates, and expanding its affiliations to all of the Big Four networks;
• Benefitting from co-ownership of TV and radio in five markets;
• Leveraging high-quality journalism and Scripps’ original television programming across a larger geographic footprint; and
• Maintaining a strong balance sheet, with expected net leverage at closing estimated at about 2x, allowing plenty of capacity for additional acquisitions. 

The combination further leverages Scripps’ digital investments, adding large and attractive markets to the portfolio. The company is building and launching market-leading digital brands that serve growing digital media audiences in addition to supporting its on-air local news brands. It also recently acquired digital brands with national reach such as Newsy and DecodeDC that will benefit from the new geographic markets.

The Scripps National Spelling Bee will remain under the stewardship of The E.W. Scripps Company.

Benefits for Journal Media Group

The spinoff will create significant strategic and financial benefits for the combined newspaper operations, including:

• Creating a powerful source of enterprise journalism and the opportunity for innovation in the industry;
• Building upon a geographically diverse portfolio of strong local media brands in 14  attractive markets, including Naples, Fla.; Florida’s Treasure Coast; Knoxville; Memphis; and Milwaukee;
• Leveraging best practices of each company across all functions to drive revenue growth, efficiency and cost effectiveness;
• Increasing scale and financial flexibility, allowing Journal Media Group to navigate the ongoing transformation of the local media landscape; and
• Establishing a solid balance sheet with $10 million of cash and no debt (Scripps is keeping substantially all qualified pension obligations).