Scripps Networks Interactive Inc.’s $1 billion buyback authorization signals the cable TV company and its controlling trust won’t seek a buyer, said Tom Eagan, an analyst at Collins Stewart LLC.
The owner of Food Network and HGTV agreed today to buy 6.4 million shares for $46.66 each, or $300 million, from the Edward W. Scripps Trust that holds 93 percent of the Cincinnati-based company’s voting power. The other $700 million may be purchased privately or on the open market, the company said in a statement.
The move indicates Scripps may not try to sell itself, said Eagan, who has a “neutral” rating on shares. On June 17, the stock registered its biggest gain in two years after the trust sought a probate court ruling that would clear the way for share sales. With the repurchase, a sale is less likely, Eagan said from New York.
“We don’t see many of the larger media companies making a bid for Scripps,” said Eagan. “Part of it is that the company is big and part of it is the nature of the programming.”
The company has a market valuation of more than $8 billion, making it an expensive purchase, Eagan said. Scripps owns non-fiction networks, including Travel Channel, DIY Network and Cooking Channel, which can be “a little bit harder of an ad sell,” he said.
Scripps fell 19 cents to $48.88 at 4:02 p.m. in New York Stock Exchange composite trading. The company has two classes of stock, common shares with no voting power and unlisted voting stock, largely held by the trust.
Scripps spokesman Mark Kroeger declined to comment on the prospects for a sale of the company.
Chief Financial Officer Joseph NeCastro told analysts last month that a buyback would be announced soon. Scripps ended the first quarter with $793.7 million in cash and near-cash, more than double a year earlier, as net income jumped 39 percent.
The buyback announced today “demonstrates our faith in the financial strength of our lifestyle-media businesses and the company’s ability to generate strong free cash flow,” Chief Executive Officer Kenneth Lowe said in the statement.
Lowe told Bloomberg Television on June 15 that the company isn’t for sale.
The repurchase plan replaces a 5 million-share authorization approved in 2008. Scripps shares have fallen 5.6 percent this year.