Scripps has agreed to acquire one of the choice station groups on the block, snagging the McGraw-Hill batch for $212 million in cash. The group includes ABC affiliates KMGH Denver, WRTV Indianapolis, KGTV San Diego and KERO Bakersfield, along with low power Azteca America affiliates in San Diego, Bakersfield, Denver, Fort Collins and Colorado Springs.
The Scripps management team said the McGraw-Hill stations were attractive because they're in growing markets, they strengthen Scripps' ABC portfolio, offer a similar news culture as the Scripps stations, and represent an avenue into the growing Spanish-language broadcasting business.
Rich Boehne, Scripps president and chief executive officer, called the deal a "smart investment in a business we already know well and run successfully. At the same time, it enlarges our field of opportunity for new digital and programming businesses by entering several of the country's most attractive TV markets."
The nine stations, which did $97 million in revenue last year, according to Scripps, reach 3% of the U.S. Scripps management said the sale price comes down to $190 million after a tax deduction. Figuring in that and the efficiencies of the larger Scripps group, Scripps brass said the deal's sales multiple comes in at well below 8 times EBITDA.
McGraw-Hill management said the deal represented a healthy cash infusion for a business that the company was looking to exit. "This transaction is another step in executing McGraw-Hill's Growth and Value Plan for the benefit of our shareholders, customers and employees," said Harold McGraw III, chairman, president and chief executive officer. "This divestiture will produce good value for a non-strategic asset as we work to create two focused operating companies, one centered on capital and commodities markets and the other on digital learning and education services.
The transaction is subject to regulatory approvals and closing conditions.
"This is a terrific opportunity to enter some of America's most dynamic media markets and tap into the growing Spanish-language marketplace at a very attractive price," said Boehne. "The McGraw-Hill stations fit well with our strategy to create economic value through high-quality news and information content that serves both consumers and advertisers through linear television and the exploding array of digital communication devices.
"These stations came up for sale at a good time for Scripps," Boehne added. "The deal is structured and financed in ways to protect the company's financial flexibility and our ability to continue investing in emerging media business models. Through this acquisition, we now have the opportunity to extend our local news strategies into markets with big appetites for community-changing journalism."
With 10 ABC affiliates among its expanded group of 19 stations, Scripps says it will be the country's largest independent operator of ABC stations.
"We've looked at several recent opportunities, but the McGraw-Hill stations were the first ones that truly energized our management team," said Brian Lawlor, Scripps senior vice president of television. "The culture at these stations will fit well with ours, and I'm excited about the compelling benefits we can deliver to our viewers, advertisers and employees in these markets. In recent years we have ramped up our commitment to unique, high-quality local news, and we're eager to have these new stations join us in that drive for success."
Lawlor said the McGraw-Hill culture is a smooth fit with that of Scripps. "They're truly dedicated in their mission of community service, to high quality journalism and to meaningful investigative reporting," he said.
Lawlor and Boehne stressed the significance of making inroads into the Hispanic community with the Azteca portion of the acquisition. Lawlor spoke about increased efficencies when scaling out corporate initiatives, such as mobile DTV and the group's RightThisMinute syndicated program.
"We're energized by the addition of good people at good stations in good markets," said Lawlor.
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