Scripps Ready To Buy, But Not Desperate

While the big guns battle it out in the M&A marketplace, Scripps bides its time, awaiting the right deals.

With only about $161 million in long-term debt, the company has capacity for acquisitions but it’s not about to get into a bidding war, said Rich Boehne, chairman-CEO-president.

“The [broadcast] industry is far less consolidated than the headlines would suggest,” Boehne said in response to a question from Gabelli & Co. analyst Barry Lucas about the company’s expansion plans during today’s conference call with analysts following release of the company’s second quarter financial report. “There’ll be opportunities in the future. We have to be patient and focused. There’s not necessarily a benefit to winning an auction. We’ll pick our spots.”

Scripps’ last buy came near the end of 2011 when it acquired the McGraw-Hill station group for $212 million, a 10.1X seller multiple and 9.5X buyer multiple. Recent deals, including Gannett’s $2.2 Belo acquisition, Tribune’s $2.73 Local TV/FoxCo buy, and Sinclair’s $985 million Allbritton deal, dwarf that deal, though the multiples are reasonably consistent.

But in a phase where the approach is go big or go home, analysts and investors are trying to parse where Scripps fits in.

“We have no plans to be a seller at this point,” Boehne said in response to another question. “We see very good opportunities in our markets and believe we can deliver value.”

To that end, Scripps would like to add stations in its existing markets but is open to broadening its market reach with the right deal, Boehne said.

“We continue to be interested in our first priority of going deeper in markets where we already do business,” he said. “We would love to add some stations in those markets…. We’re interested in other affiliates in new markets. We have a target for the kind of returns we expect. In general, beauty and value are in the eyes of the beholder. Obviously, we haven’t been able to get any [additional stations] recently.”

Perceived value also lies in the eye of the investor and investors, apparently somewhat disaffected by Scripps’ financial performance for the quarter, were sellers, with shares trading down roughly 10% at midday. Most broadcast stocks were trading slightly down, as were overall indices.

Michael Kupinski of Noble Financial Capital Markets wondered whether possible FCC action on imposing a hard coverage cap at 39% U.S. coverage would boost Scripps’s opportunity to jump in the current M&A pool.

“It’s an interesting discussion relative to the industry but not something we have a big stake in,” said Brian Lawlor, head of Scripps’ broadcast operations, noting that the company has about 13% reach.

Instead, Boehne said: “We’re more focused on and would like to see some relaxation on in-market consolidation, especially in smaller and mid-sized markets.”