CINCINNATI - The E.W. Scripps Co. will say goodbye to newspapers and hello to radio in a merger and spinoff transaction with the parent company of the Milwaukee Journal Sentinel newspaper.
The deal calls for Milwaukee, Wisc. –based Journal Communications Inc. to merge its 13 television stations and 35 radio stations into Cincinnati-based Scripps. Both companies will spin off their newspapers assets into a new publicly-traded company, Journal Media Group.
The deal is subject to the approval of shareholders and regulators. It is expected to close in 2015.
The merger will make Scripps the nation’s fifth-largest independent TV group. It will remain in Cincinnati and be controlled by the Scripps family. The newly formed newspaper company would be based in Milwaukee, employ about 3,600 and generate annual revenue of more than $500 million.
The boards of both companies have approved the transaction. The Scripps family has agreed to relinquish its 130-year control of Scripps newspapers as part of the deal.
Scripps CEO Richard Boehne said the split should enable both companies to grow their respective media platforms through acquisitions and capital investments. Journal Media Group will emerge from the deal with no debt. Scripps will have less debt than its peers in the broadcasting industry.
“It’s a big opportunity for Scripps and Scripps shareholders,” Boehne said. “It makes us a much larger television company, a much larger digital company and we also get back into the radio business. We’ll be financially a much bigger and stronger company.”
The leader of Scripps’ newspaper division, Tim Stautberg, will be the CEO of newly formed newspaper company, while Journal Communications CEO Steve Smith will be its non-executive chairman.
Stautberg said the company will be a “focused local media business with a print tradition” that will have the ability to expand beyond its 13-city footprint following the merger.
“I think it’s Scripps' way of giving its newspapers the best opportunity to enter a new chapter of their life, free of debt, free of substantially all of the pension obligations,” said Stautberg.
Scripps is retaining pension liabilities of newspaper employees as part of the transaction.
On the broadcast side, Scripps will be a “coast-to-coast news organization” with 34 television stations in 24 cities that reach 18 percent of U.S. households, said Brian Lawlor, Scripps senior vice president of television. It will own 35 radio stations in eight cities, including five markets with TV and radio combos.
“It will allow us to really tell the stories of what’s impacting America on a national scale,” said Lawlor. “Many of our digital investments … we’ll be able to scale those across almost 20 percent of the country. That creates a great business opportunity.”
Boehne, a former business reporter for the Cincinnati Post, said the decision to exit newspapers was “enormously difficult” because of its deep history in the industry but he thinks it is a business that “deserves scale and needs size” in order to grow. Edward Scripps founded the company as Cleveland's Penny Press in 1878.
“We thought it was time to take the newspapers and put them into a dedicated company so they could grow and pursue their own strategy and take advantage of opportunities that they couldn’t do inside this company,” he said.
Scripps has about 270 employees at its corporate headquarters downtown. The companies expect to gain about $35 million in “combined transaction synergies,” but Boehne said it will take months to determine how the deal will impact the Cincinnati headquarters.
For Scripps shareholders the deal will bring a one-time dividend of $60 million, or roughly $1 per share. It will be a tax-free transaction that makes shareholders of both companies owners of the surviving entity. Scripps shareholders will own 59 percent of the newspaper company following the transaction and 69 percent of the post-merger broadcast company.
Scripps is the parent company of WCPO.