The E.W. Scripps Company’s Board of Directors has responded to a $7 per share unsolicited merger offer from Sinclair Inc. by adopting a limited-duration shareholder rights plan, something it says will “ensure that all shareholders receive full value in connection with any proposal to acquire the company.”
As RBR+TVBR was first to report, Sinclair began snapping up shares in Scripps in early October. By November 6, it had accumulated enough shares of “SSP” to give Sinclair a 9.9% equity stake in Scripps.
Then, on Monday, Sinclair President/CEO Chris Ripley sent the Scripps board a merger offer — even though Scripps never asked for one.
To make the combination of Sinclair and Scripps happen, Baltimore-headquartered Sinclair is proposing that it acquire all outstanding shares of “SSP” it doesn’t already own, at $7 per share. Specifically, this would consist of $2.72 per share in cash and $4.28 in Sinclair’s “NewCo” common stock based on a 7x EV/EBITDA multiple. Sinclair claims this is “in-line” with current trading levels for “leading broadcast groups.”
Furthermore, Ripley says this represents a 200% premium to Scripps’ 30-day volume-weighted average price as of November 6 — the last trading day prior to significant share purchase activity by Sinclair, leading to a 9.9% equity interest in Scripps.
The limited-duration shareholder rights plan sends the message to Ripley and Sinclair that this is unacceptable to the Scripps board, which stresses the acquisition proposal is unsolicited and non-binding.
“The board adopted the rights plan to ensure that all shareholders receive full value in connection with any proposal to acquire the company,” Scripps said on Wednesday ahead of the Opening Bell for U.S. financial markets. “The rights plan is intended to protect shareholders from coercive tactics and to provide the board with time to thoroughly evaluate the offer and any other potential strategic alternatives. The rights plan is effective immediately and will expire in one year.”
“The rights plan is intended to protect shareholders from coercive tactics and to provide the board with time to thoroughly evaluate the offer and any other potential strategic alternatives. The rights plan is effective immediately and will expire in one year.”
The Sinclair proposal states that Scripps shareholders would possess 12.7% of the combined entity. And, Sinclair said it seeks a response from the Scripps Board of Directors on the Moelis-prepared proposal overview by Friday, December 5, “given the importance and timeliness of the transaction.”
Consider this Scripps’ thumbs down reply to Ripley.
“The rights plan leaves open all paths to create shareholder value,” Scripps said.
Kim Williams, the chair of Scripps’ board, commented, “The board is committed to acting in the best interests of all Scripps shareholders. The rights plan safeguards shareholders’ ability to receive appropriate value for their investment and ensures that the board can assess the recently received proposal, and any strategic alternatives, in a thoughtful and orderly manner.”
A SPECIAL ‘SSP’ DIVIDEND IS COMING
Per the rights plan adopted by the board, Scripps intends to issue — by means of a dividend — one Class A common share right for each outstanding Class A common share and one common voting share right for each outstanding common voting share to shareholders of record on the close of business on Monday, December 8.
Initially, these rights will not be exercisable and will trade with, and be represented by, the Class A common shares and the common voting shares, respectively.
The rights plan is effective immediately and has a one-year duration, expiring on Nov. 26, 2026.
Under the rights plan, the rights generally become exercisable only if an acquiring person obtains beneficial ownership of 10% or more of the outstanding Class A common shares. In that situation, each holder of a Class A common share right (other than the acquiring person, whose rights will become void and will not be exercisable) will be entitled to purchase, at the exercise price, additional Scripps Class A common shares at a 50% discount to the then-current market price.
In addition, if Scripps is acquired in a merger or other business combination after “an unapproved party” acquires more than 10% of the outstanding Class A common shares, each holder of a right would then be entitled to purchase, at the then-current exercise price, shares of the acquiring company’s stock at a 50% discount.
Given Sinclair’s stake in Scripps, the plan is thisclose to enactment.
Furthermore, Scripps’ board may, at its option, exchange each right (other than rights owned by the acquiring person that have become void) in whole or in part, at an exchange ratio of one Class A common share per outstanding right, subject to adjustment. Except as provided in the rights plan, the board is entitled to redeem the rights at $0.001 per right, Scripps said.
Lastly, if a person or group beneficially owns 10% or more of the outstanding Class A common shares prior to Scripps’ announcement of its adoption of the rights plan, then that person’s or group’s existing ownership percentage will be grandfathered, although, with certain exceptions, the rights will become exercisable if at any time after the announcement of the adoption of the rights plan such person or group increases its ownership of Class A common shares by more than 0.10% of outstanding Class A common shares.
SINCLAIR RESPONDS
It didn’t take long for Sinclair to react to the adoption of a limited-duration shareholder rights plan by Scripps’ board.
“We believe the strategic and financial rationale of a potential Sinclair–Scripps combination is indisputable,” a Sinclair spokesperson said. “Given the family control of Scripps, the only effect of adopting a poison pill is to limit liquidity opportunities for public shareholders of Scripps. As requested by Scripps, we offered a proposal that builds upon previous constructive conversations, and we look forward to continuing to engage with Scripps so we can reach a definitive agreement and deliver significant benefits to shareholders and local communities.”
With the Opening Bell for U.S. financial markets ahead of the Thanksgiving Day holiday on Thursday, “SSP” was at $4.41, up 3 cents per share, as of 11am Eastern. Sinclair, which trades under the “SBGI” ticker symbol, was trading at $15.84, up 14 cents, as of 11am Eastern.
Additional details regarding the rights plan are contained in a Form 8-K to be filed by Scripps with the Securities and Exchange Commission.
