SCRIPPS AGREES TO MERGE CABLE SYSTEMS WITH COMCAST CORPORATION
Wed, August 27, 1997 by Rich Boehne
CINCINNATI, Ohio – The E.W. Scripps Company has reached a definitive agreement that will result in its cable television systems being owned by Comcast Corporation through a tax-free transaction valued at $1.575 billion, or $19.68 per Scripps share.The remaining Scripps businesses – the newspaper, broadcast television and entertainment divisions – will be the new E.W. Scripps Company to be traded under the same NYSE symbol, "SSP."Following the transaction, all Scripps shareholders will receive one share in the new Scripps company and shares in Comcast in exchange for each share of Scripps owned prior to the transaction. The actual number of Comcast shares received by Scripps shareholders will depend upon the market price of Comcast shares.The total value in Comcast stock that Scripps shareholders will receive is protected as long as Comcast shares trade within a range of $17.06 to $23.09 per share during a specified period shortly before closing. If Comcast shares trade below $17.06 during that period, Scripps has the right to terminate the deal unless Comcast agrees to make up the difference in value with additional shares."Our presence in the cable industry has been good for the company and its shareholders. We've built a tremendous asset over the past 10 years," said Lawrence A. Leser, chairman and chief executive officer."The industry is changing, however, and consolidation continues at a furious pace, which gives us this opportunity to maximize the value of our systems and deliver that value directly to our shareholders," Leser said.The transaction, expected to close in the second half of 1996, is conditioned upon, among other things, approval by Comcast shareholders and the holders of Scripps' Common Voting Stock. The Edward W. Scripps Trust, owner of 80 percent of those Scripps shares, has agreed to vote in favor of the transaction. Comcast's controlling shareholder also has agreed to vote in favor.The Scripps Cable Division:In 10 years, Scripps grew to be the nation's 16th largest cable system operator. Through acquisition and internal growth, subscribers moved up from 56,000 in 1985 to more than 792,500 at present.The Company's single largest system, in Sacramento, was built from scratch and completed in 1988. The system now serves 231,000 subscribers in the California capital.In the first nine months of 1995, the Scripps cable division had revenue of $207.9 million, up 10 percent year-over-year; operating cash flow (operating income before depreciation and amortization) of $86.1 million, up 20 percent; and operating income of $45.1 million, up 64 percent.For the 12 months ended Sept. 30, 1995, the cable division had revenues of $273.7 million, operating income of $57.5 million, and operating cash flow of $111.6 million.The Scripps cable division includes the following properties (figures as of Sept. 30,1995):System ClusterBasic SubscribersSacramento231,300Chattanooga111,900Knoxville106,400Atlanta74,100West Virginia55,000Rome, Ga.49,500Lake Cty., Fla.49,300Western Kentucky43,000Colorado38,000Mid-Tennessee34,000Total792,500 On Oct. 26, the Company signed an agreement to purchase, for $62.5 million, the Mid-Tennessee CATV, L.P. systems, which are adjacent to the Company's clusters in Knoxville and Chattanooga. The transaction is expected to close by year end 1995 and be included in the Comcast merger.The New Scripps:Newspapers, Broadcast Television, Entertainment"This is just one step, albeit a significant one, in the ongoing development of Scripps, which has been a leader in media innovation for nearly 120 years," said Leser, Scripps chairman."The new Scripps, with virtually no debt and strong cash flow, will focus on the development and ownership of information and entertainment content. Our newspaper, television and entertainment franchises will provide a diverse revenue stream and an outstanding platform from which we can bring new and valuable enterprises to the media marketplace," Leser said.The new company will operate through three divisions:Newspapers: 18 geographically diverse local franchises with total circulation of 1.3 million daily and 1.4 million on Sunday. Among the largest Scripps papers are the Rocky Mountain News in Denver; The Commercial Appeal in Memphis; The News-Sentinel in Knoxville; the Ventura County Newspapers in Ventura, Calif., and The Daily News in Naples, Fla.Broadcast Television: Nine network affiliates among the 60 largest markets, together reaching 10 percent of the total U.S. audience. The Company owns the ABC affiliates in Detroit, Cleveland, Tampa, Phoenix and Baltimore; the NBC affiliates in Kansas City, West Palm Beach and Tulsa; and the CBS affiliate in Cincinnati, which will change its affiliation to ABC in 1996.Entertainment: An emerging division created in 1994 to focus on video programming, licensing and syndication. The division includes:United Media, a worldwide syndicator and licensor of comic strips, comic characters and prestigious brands. Its best-known properties include the "Peanuts" and "Dilbert" comic strips. Through recent agreements, United Media has become the worldwide licensing agent for both National Geographic and the Public Broadcasting Service (PBS). The United Media Web site is among the 10 most popular on the Internet.Home & Garden Television, a 24-hour television network launched at the end of 1994. HGTV's growing audience includes cable systems in 134 markets plus DIRECTVв nationwide. More than 200 national advertisers support 54 programs, including an all-original primetime lineup. HGTV also is expanding its marketing reach through a recently established call center, a growing database, an advertiser-supported monthly programming guide, a library of videocassettes for sale to consumers, and a quarterly interactive "magazine" on CD-ROM with a built-in Internet access feature.Cinetel Productions, a major producer of programming for cable. Cinetel currently is producing seven series plus specials for six networks (The Nashville Network, Arts & Entertainment, Learning Channel, History Channel, Discovery Channel and HGTV).Scripps Howard Productions, a creator of programming primarily for the broadcast networks, which currently has more than 50 hours of programming in various stages of development and production. Its first project, "Tycoon," a primetime NBC News profile of Microsoft founder Bill Gates, aired in May. Its second production, "Shadow of a Doubt," is a two-hour NBC telefilm starring Brian Dennehy, scheduled to air Dec. 3. Scripps Howard Productions is now filming its first ABC movie, "Breach of Faith," starring Kate Jackson and Tracey Gold and is readying an ABC primetime special, a CBS miniseries and a two-hour NBC series pilot for anticipated production in the first quarter of 1996.Pro forma operating results for the new Scripps, in the 12 months ended Sept. 30, 1995, were as follows:NewspapersTelevisionEntertainmentConsolidated($ in millions)Revenues$629.3$297.4$86.1$1,012.8Operating cash flow$153.6$114.7$(11.6)$241.1Operating income$117.5$89.6$(14.2)$176.5(Consolidated operating cash flow and operating income are net of corporate expenses of $15.6 million and $16.4 million, respectively.)The new E.W. Scripps Company intends to maintain its current quarterly dividend of 13 cents per share.Merrill Lynch & Co. acted as financial advisor to The E.W. Scripps Company in this transaction.