Analysts Ponder Scripps Spin-Off

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By: Jennifer Saba

As E.W. Scripps readies to split into two companies, analysts are weighing in on the value of the move.

By June 30, E.W. Scripps will be separated into Scripps Networks Interactive and E.W. Scripps. The former company takes Scripps’ cable networks and Interactive media like Shopzilla and uSwitch; E.W. Scripps will operate the company’s newspapers and broadcast stations.

It’s no surprise that Scripps Network Interactive should generate more interest from investors, since it is growing faster than Scripps’ newspaper and broadcast units.

In a note to investors released this morning, Goldman Sachs analyst Peter Appert wrote, “the rationale for the spin-off is compelling as the company splits along strategic lines, separating high-growth, national ad focused networks and cable divisions from its slower-growth, locally-focused traditional newspaper and broadcast businesses.”

Goldman Sachs already considered the high growth portions of E.W. Scripps in the past; analysts don’t expect the spin-out to “create meaningful value given that investors are already attributing a premium multiple to the higher growth businesses.” However, they acknowledge it could cause some “short-term” trading opportunities.

Appert wrote that there would likely be pressure on the “new” E.W. Scripps as investors potentially seek to liquidate their holdings in the company as it becomes a smaller cap, slower growth, traditional media company. Goldman anticipates E.W. Scripps to trade at roughly $8 per share after the spin-out.

Goldman Sachs maintained its “neutral” rating on the company.

Wachovia analyst John Janedis issued a note this morning on E.W. Scripps as well and pointed out that that Scripps Network Interactive assets are favorable. Wachovia maintains its “market perform” rating on the stock ahead of when issued trading begins next week.

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