Warren Buffett’s Berkshire Hathaway has revealed its second big deal in a week with a $US600 million funding deal in a $US2.65 billion (A3.7 billion) media takeover that will see broadcasting company E.W. Scripps Co buying the privately-held entertainment firm ION Media.
As a result, Berkshire will become the largest shareholder in the combined company which will be the largest holder of TV broadcast spectrum in the US.
Last week Berkshire was in tech, becoming a foundation investor in a $US250 million ($A357 million) injection of funds into new data warehousing company, Snowflake – a deal that saw Berkshire handed an unrealised capital profit of $A800 million on the first day of trading.
Berkshire will also get a warrant to purchase as many as 23.1 million Class A Scripps shares at $US13 apiece. Scripps stock closed Wednesday at $10.47.
Now Berkshire is returning to help finance a deal in legacy media that will see the company buy $US600 million of preferred shares to help finance Scripps move.
Ion Media is an American broadcasting company that owns and operates over 60 television stations in most major American markets, as well as a digital sub-channel through that group and a major commercial television network. It’s been a privately owned company since its founding.
Berkshire isn’t taking a direct equity interest at this stage, although the prefs do give it the right to convert to ordinary shares at a later date.
Buffett has been in TV in the past – it helped finance the creation of ABC by financing Capital Cities in 1985 in its $US3.5 billion bid for ABC. The merged company was later bought by Disney. Disney’s takeover saw Berkshire Hathaway receive $US1.2 billion cash and $US1.3 billion in Disney stock, realising a $US2.2 billion gain.
Berkshire owns a Florida (Miami) free to air affiliate of ABC which it bought in 2014 from the family that used to own the Washington Post (The Graham Family).
Earlier this year Buffett quit all his US newspapers in a $US140 million deal with lee Enterprises which has operated the company for the past 18 months. Berkshire financed the purchase with a $US576 million loan at 9%.
Scripps had a market value of $US850 million before the deal (the shares jumped 30% on Thursday after the news broke).
Based on Scripps’ stock closing price of $US10.47 on Wednesday, the investment represents about 57.3 million shares, or roughly 70% of the shares outstanding. Berkshire was the Scripps’ second-largest shareholder before the deal, with 5.7% of the issued shares.
Scripps operates 60 local television stations and has networks including Court TV, Bounce and the multi-platform news provider Newsy. The deal would roughly double the company’s television station footprint (ION has more than 60 local stations) and boost distribution of its programming.
Scripps, which traces its roots back to 1878, once owned cable networks such as the Food Network and HGTV, but spun off that business in 2008. Discovery (partly controlled by John Malone’s Liberty) bought the former Scripps business in 2017.
Scripps has now made free to air TV its focus after exiting newspapers and radio in recent years.
ION Media, based in West Palm Beach in Florida was started in 2008 (ION TV started in 1998). Its owned by credit investment firm Black Diamond Capital Management, it operates a national TV network with a lineup including crime shows such as “Law and Order” and “NCIS: Los Angeles.”
ION Media owns television stations in 62 markets—including many of the top ones in the country—and, along with affiliates. It reaches nearly every US home. Scripps will be able to use its so-called over-the-air network to reach viewers without hefty leasing payments it now has to pay.
US analysts say the over the air (broadcast, but not through cable) is now attracting more interest in the US as streaming video services like Netflix make inroads into cable viewing (which is still the preferred way of delivery linear TV in the US) and drive subscribers to ‘cut the cord’ and abandon their subscriptions to cable services from AT&T, Verizon and others.
Scripps CEO Adam Symson alluded to that in the announcement saying, “ ith this national broadcasting acquisition, Scripps will be the largest holder of broadcast spectrum, poised to take an even greater leadership role in the development of future business models that leverage ATSC 3.0 (a new broadcast technology that enables the delivery of 4K transmissions) and spectrum
