E.W. Scripps Company (NYSE:SSP) said today it is going to split itself into two publicly traded companies and the stock is up 7% on the news.
The E.W. Scripps Co will include the company's newspapers and local television stations. The second company, Scripps Networks Interactive, will include Home & Garden Television and the Food Network, and the Shopzilla online shopping service -- this is the one we really care about.
Scripps Networks is the company's largest division that includes its popular national lifestyle television networks, Q2 2007 revenue grew 7.6 percent year over year to $308 million. Segment profit for the division increased 9.2 percent to $164 million for the period. Online revenue at Scripps Networks grew 26 percent to $19.4 million during the second quarter. Second-quarter financial performance at Scripps Networks was favorably affected by growth in advertising sales, both on television and the Internet, and higher affiliate fee revenue. However, softness in total-day ratings among key demographics at HGTV and Food Network held back advertising revenue growth during the quarter.
Scripps Networks, which includes television and interactive brands HGTV, Food Network, DIY Network, Fine Living and Great American Country, accounted for 48 percent of the company's consolidated revenue during the second quarter.
Scripps Chief Executive Ken Lowe will be president and chief executive of the interactive company, while Chief Operating Officer Richard Boehne will run the newspaper and TV station company.
Scripps owns about 20 daily papers, including the Cincinnati Post and the Knoxville News Sentinel in Tennessee.
Wall Street increasingly views the newspaper business as a losing proposition because advertising sales are falling and circulation is dropping as more people get their news online.
"This has been probably the toughest 24 months in the history of the newspaper industry," Boehne said on a conference call with financial analysts. "We're eager for that to level out."
That has led some investors to urge companies like Scripps to spin off their publishing operations so they do not drag down the value of their broadcast operations
"I think this achieves what the shareholders have been wanting, to get out from under the burden of the old-media valuation and focus on the higher-value media business," said Benchmark Co analyst Ed Atorino.
Belo Corp earlier in October said that it would spin off its newspapers from its 20 television stations and their Web sites. Investors cheered the move because it promises to free the broadcast operations from the lethargic newspaper business.
Other companies with significant publishing and broadcasting operations include Media General Inc and Gannett Co Inc.
Scripps expects to complete its transaction, which will take the form of a stock dividend in Scripps Networks Interactive, in the second quarter of 2008.
Both companies will be based in Scripps's current headquarters of Cincinnati. The split "is not expected to have a material effect on the day-to-day lives of its employees," the company said.
The Edward W. Scripps Trust would maintain control of both companies by electing a majority of board members for each.
Separately, Scripps said it was not having "current discussions" with Tribune Co about buying the Chicago-based publisher and broadcaster's 31 percent stake in the Food Network.
"We've stated many times we're always interested in obtaining that last piece of the Food Network, but at the right price," Lowe said during the conference call.
NOTE:Sources taken from Reuters article - E.W. Scripps to split into two companies
