The stock price of Hearst-Argyle Television declined 6% yesterday after Hearst Corporation dropped its bid to buy out public shareholders. Even so, the stock price closed three cents above the abandoned bid of 23.50 per share and well above the 20.42 price back in August before the offer was made. So, what happens now?
Bear Stearns analyst Victor Miller doesn’t think this is over. But he wonders what message Hearst Corporation was trying to send. "Hearst Corp. did not offer a ‘bump’ in the price, which was a bit surprising. The ‘no bump’ suggests Hearst Corp. is sending a message. Here are some ideas: Hearst Corp. a) has changed its mind on the prospects/valuations for TV assets, b) is preparing for a new bid but wants to tamp down shareholders expectations, c) could not come to an agreement on valuation with HTV’s largest shareholders (for now) or d) is simply going through the machinations of the process and will weigh the possibility of a higher bid. Which one is Hearst Corp. sending?" Miller asked as he pondered the issue for his clients.
But while there is no bid currently on the table, Miller thinks there is another chapter yet to be written, but that may take some time. "We still think a bid in the 25.50-27.00 range is a more accurate representation of company value," the analyst said.
RBR observation: Hearst Corporation still owns 73% of Hearst-Argyle, so it is not likely to seek another buyer, nor would any unsolicited bid have much chance of going anywhere. As noted by some of the folks who’d objected to the 23.50 price, Hearst Corporation has paid more than that for many of the Hearst-Argyle shares it now owns. We wait to see if the company goes back to buying shares in the public market. That 27% stake now held by the public could just be gnawed away until Hearst Corporation makes another bid to take Hearst-Argyle private.