Sinclair Buys Stake in E.W. Scripps to Push for Merger Deal

Industry officials told us that the stock purchase is likely intended to demonstrate Sinclair’s commitment to an eventual deal while also suggesting that it could attempt to force one by acquiring a large enough piece of the company. In a release Monday, Scripps said its board “will take all steps appropriate to protect the company and the company’s shareholders from the opportunistic actions of Sinclair or anyone else,” but it will also “continue to evaluate any transactions and other alternatives that would enhance the value of the company.”

Scripps owns 60 stations in more than 40 markets, along with Court TV, Ion and Grit, and announced Q3 revenue of $526 million earlier this month. Sinclair has 185 stations and had Q3 revenue of $773 million.

Sinclair said in the SEC filing that its board and management team "have engaged in constructive discussions" with Scripps “for several months regarding a potential combination of the two companies.” Industry officials told us that the response from Scripps appeared to indicate that its leadership is averse to a Sinclair purchase, and the companies are seen as having vastly different management styles. Scripps could respond by seeking a deal with another company, such as Gray Media, an industry official told us.

However, Gray executives said on a recent earnings call that it doesn’t need to grow larger (see 2511070037). In Sinclair’s most recent earnings call, CEO Chris Ripley predicted that the broadcast industry will consolidate into two mega companies -- the combination of Nexstar/Tegna and another of equal size (see 2511060045).

“Further scale in the broadcast television industry is essential to address secular headwinds and compete effectively with larger-scale big-tech and big-media players, as well as major broadcast groups,” Sinclair told the SEC. “Greater scale will also strengthen broadcasters' ability to sustain their vital public service role in producing local news.” Purchasing Scripps would provide “the ability to compete successfully for advertising share, critical programming, and distribution economics through enhanced local and national scale, coupled with disciplined execution of synergies.”

Sinclair purchased 6,275,204 non-voting shares of Scripps, the filing said. A person familiar with the deal told us that the shares were purchased over several days and that Scripps’ share price likely fluctuated during that time, but the stock price was $3.06 at market close Friday. At that price, the shares would have cost Sinclair close to $20 million. Scripps' share price rose after Sinclair’s filing, hitting $4.28 at market close Monday.

The stock purchase doesn’t require Sinclair to file applications at the FCC because it concerned non-voting shares, but a transfer of control of Scripps stations to Sinclair would require an FCC approval. It would also require the national ownership cap to be either eliminated or waived, attorneys told us. Scripps on its own is only slightly under the 39% audience reach cap and would be over the limit on its own if the UHF discount were eliminated (see 2011050024). Nexstar’s proposed purchase of Tegna also hinges on the national ownership cap being removed (see 2511040059).

FCC Chairman Brendan Carr is widely expected to act on the cap next year, but any move to eliminate it would almost certainly face a robust and lengthy court challenge. Nexstar CEO Perry Sook has said his company's applications for the Tegna deal will include requests for waivers of existing rules unless those rules have been rendered moot. A Sinclair/Scripps deal could use a similar tactic, a person familiar with the deal told us. The FCC has active proceedings on the national cap and local broadcast-ownership rules. Sinclair told the SEC that a deal could be completed in nine to 12 months if the companies agree to move forward.

“The consolidation of these assets makes a great deal of sense,” said Tideline Partners media broker Greg Guy, who isn’t involved in the transaction. “It's clear Sinclair is very serious about this process, and it will be interesting to see where this leaves Scripps.”