5. Buffett backs major TV deal after bailing on papers
E.W. Scripps agreed to buy ION Media, a privately-owned broadcasting company, for $2.65 billion last week, with the financial help of Warren Buffett's Berkshire Hathaway. Hathaway will help Scripps finance the purchase with a $600 million preferred-equity investment.
Why it matters: Buffett's alignment with the deal is noteworthy given that the financial tycoon recently sold his stake in his beloved newspapers business.
- But ION, which owns the country's largest broadcast station group, provides most of its programming to consumers over-the-air, a free method of TV consumption that's growing rapidly.
- Free, over-the-air broadcast is a nice compliment to those paying for lots of subscription streaming services and it's a cheaper alternative to rising cable costs.
"This is about really good economics with a lot of potential upside and room to grow based on the growth of OTA and changes in consumer behavior," says Carolyn Micheli, senior vice president of investor relations and corporate communications.
- "They see this as something they can make money in an industry that has solid growth ahead of it."
How the deal works: Scripps will combine Ion's 124 affiliate broadcast stations with its own multi-cast network stations that it acquired through the purchase of Katz Networks in 2017, giving it access to most U.S. television households.
- It will combine that reach with Scripps' syndicated networks like Court TV and Bounce and its multi-platform news station Newsy, to create a national broadcasting behemoth.
- Micheli says she expects the deal to produce $500 million in synergies in the next six years.
The big picture: Scripps has focused on refining its business to focus on local and syndicated television, after spinning off its cable networks like HGTV and The Food Network in 2008 — networks that eventually landed in the hands of Discovery nearly 10 years later. It sold its podcasting business, Stitcher, in July to SiriusXM for more than 4x Stitcher's 2019 revenue of $72.5 million.