The E.W. Scripps Company (NYSE:SSP)

CAPS Rating: 5 out of 5

A diverse media concern with interests in national television networks, newspaper publishing, broadcast television, interactive media and licensing and syndication. All of its media businesses provide content and advertising services via the Internet.

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Member Avatar TMFDeej (99.32) Submitted: 2/23/2015 12:15:56 PM : Outperform Start Price: $22.00 SSP Score: +6.64

I've come across two articles on the pending merger / spinoff of E.W. Scripps (SSP) and Journal Communications (JRN) recently. This is actually a really cool special situation, the two media companies are merging and then splitting up into two, more focused companies. The new SSP will become will the fifth largest independent broadcast media company in the U.S. with 34 TV stations and 34 terrestrial radio stations.

As an added bonus Scripps will continue to run the world's oldest spelling competition the Scripps National Spelling Bee. Caching...OK not really, but it is interesting :).

The new JRN will own a the Milwaukee Journal Sentinel and a number of mid-size and community newspapers in fourteen markets.

From the excellent Clark Street Value Blog:

E.W. Scripps & Journal Media Group: Double Spin, Double Merger

http://clarkstreetvalue.blogspot.com/2015/02/ew-scripps-journal-media-group-double.html

Here's the conclusion from the piece: "While there's not a ton of upside, there doesn't seem to be a lot of downside either considering both companies will be in a strong financial position compared to peers."

From this week's Barron's:

A Winning Script for Scripps

E.W. Scripps’ planned merger with Journal Communications could boost the value of the combined companies’ broadcasting and newspaper operations.

http://online.barrons.com/articles/SB51367578116875004693704580474852414925906

Here's the important parts:

"Scripps is trading at a 25% discount to its sum-of-the-parts value of $29, according to Michael Kupinski of Noble Financial. The next catalyst for a higher stock price could come on March 11, when shareholders vote on the deal...Kupinski’s $29 value is based on 10.8 times his 2015-16 cash-flow estimates for the new Scripps, and a multiple of 4.3 for the newspaper spinoff. Scripps will pay $60 million in a special dividend when the deal closes."

While I'm always a sucker for SOTP valuations of stock (above) this is my favorite part of the Barron's article:

Scripps will also see growth from retransmission consent fees, or the fees paid by cable operators to carry a broadcaster’s programming. Those fees are below the market rate for Scripps, because the company accepted lower fees in the past from cable operators in return for increased distribution of its former cable networks. Scripps is now renegotiating those contracts, which could send the fees soaring...Scripps has said it could reap fees of as much as $165 million this year, up from an estimated $55 million in 2014, assuming the merger goes through.

I was involved in a somewhat similar situation to this several years ago when I owned American Water Works Company (AWK). I think that probably goes down as my favorite investment of all-time. Not because it was my highest percentage return ever, it wasn't, but because it was such a cool, unusual special situation. It's a long story, but the short of it is that in the deal to bring AWK public its former private equity owners had to promise not to hike consumer rates for its services for several years. As a result, AWK screened terribly because its margins were so much worse than similar companies. I bought in right before the rate hike moratorium was lifted and watched the company raise rates all over the place for the next couple of years, significantly outperforming the market and its competition. I suppose that I sort of went off on a tangent here, but if Scripps really will be able to significantly improve the fees that it gets from cable television operators in the suture, that would be a similar really cool special situation.

Jason

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Member Avatar CellBlock9 (91.14) Submitted: 9/26/2014 9:24:29 PM : Outperform Start Price: $16.99 SSP Score: +30.55

S&P 5 star,17.78

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Member Avatar d3ming (26.36) Submitted: 6/23/2013 4:43:55 PM : Outperform Start Price: $14.34 SSP Score: +29.50

screener pick

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Member Avatar recklessfier (< 20) Submitted: 4/26/2013 3:53:07 AM : Outperform Start Price: $13.43 SSP Score: +41.44

Screener_DBI

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Member Avatar soulwhisperfool (87.07) Submitted: 5/13/2008 12:17:42 AM : Outperform Start Price: $10.27 SSP Score: +72.61

With the split of the company coming soon, it will only make them stronger on their cable television endeavors. HGTV and the Food Network are very strong brands.

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Member Avatar diaple8 (43.73) Submitted: 5/12/2008 10:18:11 AM : Outperform Start Price: $10.12 SSP Score: +74.13

Diversification with media in television, print and content and advertising services via the internet will make this investment worthy.

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Member Avatar Tatanka44 (< 20) Submitted: 5/4/2008 7:46:55 PM : Outperform Start Price: $9.93 SSP Score: +81.21

Diversification is the name of the game. Scripps does this better than any other media company. They are conservatively managed, have a knack for developing top rated cable shows and their newspapers are second to none. By them now before you are sorry.

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Member Avatar moneyduck1 (< 20) Submitted: 10/19/2007 10:48:46 PM : Underperform Start Price: $9.17 SSP Score: -107.49

Newspapers are a dying industry plus there loosing there butts doing buisness with Dean Singelton and the JOA,s he has created in Denver over 150 mil in new presses.

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Member Avatar MissDookN (36.50) Submitted: 5/10/2007 12:42:06 PM : Outperform Start Price: $8.98 SSP Score: +112.70

This stock meets my criteria for a long-term buy: great management and a good price.

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Member Avatar msaloha (63.29) Submitted: 10/9/2006 9:08:16 PM : Outperform Start Price: $10.35 SSP Score: +61.00

They run one of my favorite channels FINE or FineLiving. Shows are informative and high quality productions given in 30min. segments.

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Member Avatar pslopepup (65.68) Submitted: 9/15/2006 9:29:25 PM : Outperform Start Price: $9.87 SSP Score: +67.89

Owns Food Network, which is popular and cheap to produce. Put another way, Mario Batali probably couldn't afford his lavish lifestyle on FoodTV paycheck alone.

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Member Avatar TMFLucky11 (99.62) Submitted: 9/6/2006 3:01:21 PM : Underperform Start Price: $10.02 SSP Score: -60.16

I just can't help but feel that this company is falling prey to the same dangers afflicting other media businesses. Granted, it's more diversified than, say, MNI or NYT, but I'm not at all sure it will escape the newspaper revenue decline. And that could, at least in the shorter term, be its downfall.

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