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Scripps Split Clears IRS Hurdle

E.W. Scripps came a step closer to separating its assets into two separate entities, receiving confirmation form the Internal Revenue Service Tuesday on the tax-free status of the split.

Scripps announced in October its intention to split the company into two separate units  – Scripps Networks Interactive, which would include its cable networks HGTV, Food Network, Great American Country, Fine Living and DIY and their related Web sites; and E.W. Scripps & Co., comprising its daily and community newspapers in 17 markets and 10 broadcast television stations.

The split is expected to take the form of a pro-rata distribution of stock to Scripps shareholders in the new company created in the deal, Scripps Networks Interactive. The IRS confirmed Tuesday that the distribution will be tax-free to Scripps shareholders.

Scripps Networks Interactive, which will be headed by current E.W. Scripps CEO Ken Lowe, is expected to be the larger of the two companies, with $1.5 billion in annual revenue and about $600 million in annual operating cash flow. E.W. Scripps should have annual revenue in the $1 billion range with operating cash flow of between $225 million and $250 million.

In a statement, Scripps said that it planned to issue a Form 10 registration statement with the Securities and Exchange Commission by the end of this month. The full separation is expected to be completed in June.