Scripps to acquire Harte-Hanks newspapers and TV station; announces stock repurchase plan

Tue, August 26, 1997 by Rich Boehne

CINCINNATI, Ohio – The E. W. Scripps Company today reached an agreement to acquire six newspapers, one television station and one radio station from Harte-Hanks Communications."This is the kind of deal we’ve been looking for," said William R. Burleigh, president and chief executive officer. "For an attractive price, we’re going to greatly increase the geographic diversity of our newspaper division through the addition of five mid-sized markets in the vibrant Texas economy, plus one growth market in South Carolina."The television station – KENS in San Antonio, Texas – has been one of the industry’s strongest franchises for many years. This also puts us back in business with the CBS network, adding some diversity to our current lineup of ABC and NBC stations," Burleigh said.As payment for the properties, Harte-Hanks will receive:· Value of between $605 million and $625 million through a tax-free "Morris Trust" transaction. Scripps will issue Class A Common stock to Harte-Hanks shareholders valued at between $425 million and $605 million, depending upon the level of debt, if any, being carried by the Harte-Hanks properties. Scripps has agreed to assume up to $200 million in debt, in which case the total consideration would be $625 million. As the level of debt decreases, so does the total consideration on a sliding scale that results in total consideration of $605 million for an all-stock transaction. The exact number of shares issued will then be determined by the trading price of Scripps shares within a "collar" range of $33 and $40. · Or, Scripps will pay $775 million in cash to Harte-Hanks if a "Morris Trust" transaction is not feasible due to the outcome of pending federal legislation. The Morris Trust merger and the all-cash transaction are of approximately the same economic value to Scripps.The companies expect to determine by Dec. 31, 1997 how the transaction will be consummated.Scripps also announced that its board has authorized the repurchase of up to the maximum number of Class A Common shares that could be issued through the Harte-Hanks transaction. The company intends to purchase shares in the open market from time to time, depending upon market conditions.The Harte-Hanks properties are projected to produce $65 million in operating cash flow (EBITDA) in 1998. Regardless of the method of payment, the transaction should result in about 5 percent dilution to the company’s earnings during the first year of ownership. The transaction should be accretive to earnings as early as the second or third year of ownership.Five of the six Harte-Hanks newspaper operations are dominant media franchises in mid-sized markets: Daily publications State Daily circ. Sunday circ.· Corpus Christi Caller-Times Texas 68,200 90,300· Abilene Reporter-News Texas 41,600 51,000· Wichita Falls Times Record News Texas 38,100 45,200· San Angelo Standard-Times Texas 32,700 38,800· Anderson Independent-Mail S.C. 41,400 47,800 Also included is a group of non-daily community newspapers reaching more than 95,000 homes in suburban Dallas. Acquisition of the Harte-Hanks publications will give Scripps a total of 22 separate newspaper markets and total circulation of 1.4 million daily and 1.6 million on Sunday.San Antonio television station KENS, VHF channel 5, has been that market’s local news leader for many years. The CBS affiliate produces and airs 29 hours of live, local news each week. The station’s late night newscast has been No. 1 for 24 straight years.Since 1993 the KENS broadcast franchise has included a sister radio station, KENS-AM, featuring simulcasts of KENS-TV news, along with other local news, information and call-in programming. San Antonio, with 642,000 households, is the third-largest broadcast market in Texas and the 38th largest in the nation. The addition of KENS will expand the Scripps TV group to 10 stations – six affiliated with ABC, three with NBC and one with CBS. In connection with the Harte-Hanks transaction, the Scripps board has granted the Edward W. Scripps Trust an option to buy whatever number of shares is required for the trust to maintain majority ownership of the company’s Class A Common Stock.The trust currently holds 82 percent of The E. W. Scripps Company’s Common Voting Stock, which is not publicly traded, and 53 percent of its Class A Common Stock, which is publicly traded on the New York Stock Exchange. In March the trustees asked an Ohio probate court for a declaratory ruling confirming that the trust agreement requires the trust to hold only a majority of the outstanding Common Voting shares of the company, not a majority of outstanding Class A shares or a majority of the company’s total outstanding shares. The number of shares issued to Harte-Hanks shareholders through the Morris Trust transaction would dilute the trust’s ownership of Scripps Class A Common to below 50 percent.The trust’s option is exercisable only if a Morris Trust transaction is completed. The option expires one year following an adverse ruling by the court or six months following completion of the company’s stock repurchase program, whichever comes later.The trust anticipates a court ruling later this year and believes that the ruling should be favorable.The Scripps/Harte-Hanks transaction is subject to customary regulatory approvals.The E. W. Scripps Company currently operates television stations in nine markets and newspapers in 16 markets. Through its entertainment division, the company operates United Media, a syndicator and licensor of news features and comics; two television programming companies, Scripps Howard Productions and Cinetel Productions; and a cable television network, Home & Garden Television.