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E.W. Scripps Jumps 8% On Warren Buffett-Backed ION Media Deal
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E.W. Scripps Jumps 8% On Warren Buffett-Backed ION Media Deal

Shares of TV station owner E.W. Scripps jumped 7.6% on Thursday after confirming the acquisition of broadcast network ION Media for $2.65 billion. As part of the deal, billionaire investor Warren Buffett-led Berkshire Hathaway will make a preferred equity investment of $600 million in Scripps. In exchange, Berkshire will receive a warrant to purchase 23.1 million Class A Scripps shares at $13. 

The E. W. Scripps Company (SSP) said that it will combine the ION business “with Scripps’ Katz networks and Newsy to create a full-scale national television networks business,” which will reach customers through over-the-air broadcast, cable, over-the-top and other digital platforms, with ad-supported programming streams. The deal will also reposition the company in the television landscape.

Scripps’ CEO Adam Symson said “With its strong revenue growth, high margins and significant cash flow, ION will make Scripps a more powerful and durable media business with significant near-term benefit as well as long-term value.” The deal should also yield $500 million in synergies over the next six years. (See SSP stock analysis on TipRanks).

On Sept. 9, Noble Financial analyst Michael Kupinski maintained a Buy rating on E.W. Scripps and raised the price target to $17 (50.8% upside potential) from $16. He said “Flowing through the high margin revenue upside, we are raising our Q3 adj. EBITDA estimate from $85.9 million to $95.9 million and our full year 2020 cash flow estimate from $334.7 million to $351.7 million.”

Kupinski also raised his free cash flow estimates after Scripps’ 27 TV stations resumed on the Dish Network on Sept. 6. He believes that “there is upside to these estimates should Political advertising continue its favorable trajectory.” 

Currently, the Street has a bullish outlook on Scripps with a Strong Buy analyst consensus, which is based on 3 Buy ratings. The $16 average analyst price target implies upside potential of 42% to current levels. However, shares have declined by 28.3% year-to-date.

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