Warren Buffett backs EW Scripps’ deal to buy ION Media Networks for $2.65bn
Scripps shares soar 43% on news Berkshire is investing $600m to help finance the deal
New York — TV-station owner EW Scripps agreed to buy ION Media Networks for $2.65bn with help from Warren Buffett’s Berkshire Hathaway, moving aggressively to expand its footprint in a challenged but still lucrative industry.
Berkshire is making an investment of $600m in preferred equity in Scripps to help finance the deal, Scripps said in a statement on Thursday. Berkshire also received a warrant to buy as many as 23.1-million Class-A Scripps shares at $13 each. Scripps stock closed on Wednesday at $10.47.
Scripps shares soared as much as 43% to $15 in New York trading on news of the deal for ION’s TV stations and broadcast network, which was reported earlier on Thursday by the Wall Street Journal. The stock was up 16% to $12.14 before the close.
Cincinnati-based Scripps will roughly double its roster of 60 TV stations with the addition of closely held ION, which is controlled by Black Diamond Capital Management. It plans to divest 23 ION stations to win regulatory approval for the deal.
Scripps operates networks including Court TV through its Katz division and also runs Newsy, a multiplatform news provider. ION, based in West Palm Beach, Florida, runs a national network that shows crime programming such as “Law & Order”.
Scripps said the combination would generate savings of as much as $500m over six years, reaching an annual run rate of $120m, mainly through avoiding carriage fees it now pays to other broadcasters for the Katz networks. As current contracts expire, Scripps plans to migrate its programming to ION’s digital subchannels.
Cord cutters, who tend to be younger viewers that advertisers struggle to reach, are increasingly watching free over-the-air broadcast channels with digital antennas, Scripps CEO Adam Symson said on a conference call.
Symson said the ION deal will help Scripps capture a growing share of the national advertising market, since Scripps has largely focused on local TV broadcasting.
“Over-the-air might not be sexy, at least not yet, but ION and Katz are proof that there is a lot of value being created here,” Symson said.
The deal is the latest sign of consolidation in the TV industry. Stations can be lucrative because they usually generate a windfall of political advertising dollars during election seasons. Bulking up also lets station owners generate more efficiencies to counter the steady loss of traditional TV viewership to streaming platforms.
In 2018, Nexstar Media Group agreed to buy Tribune Media for $4.1bn, creating the largest owner of local TV stations, and Gray Television struck a deal to acquire Raycom Media for $3.65bn. Apollo Global Management agreed in 2019 to buy a majority stake in Cox Enterprises’s television broadcasters.
Buffett has provided funding for several transactions in recent years. In 2019, Berkshire helped Occidental Petroleum finance its $37bn takeover of Anadarko Petroleum, receiving preferred stock and warrants in return.
Buffett’s Berkshire also has some familiarity with the broadcast side of the media world. He bought a Miami television station as part of a swap for Graham Holdings stock in 2014 and also bet on Capital Cities/ABC before it was purchased by Walt Disney in 1996.
But Buffett has recently pulled back from media, striking a deal earlier in 2020 to offload his network of local newspapers, including his hometown Omaha World-Herald, to Lee Enterprises. As part of the transaction, Berkshire agreed to lend $576m to Lee.
The Berkshire investment in Scripps was led by one of Buffett’s top deputies, Ted Weschler. He has helped Buffett with media investments before, playing a role in Berkshire’s deal with Media General for a range of newspapers. He eventually helped oversee the relationship with Lee.
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