Merrill Lynch Downgrades Scripps

By: Jennifer Saba Merrill Lynch downgraded E.W. Scripps from "buy" to "neutral" over concerns of the company's latest acquisition.

Scripps announced this morning it was buying uSwitch, a provider of online and phone-based comparison and switching services for utilities, like electricity, gas, phone and personal finance.

Merrill Lynch notes that Scripps said the deal will dilute 2006 earnings per share by $.10 to $.15 and they are paying a multiple of 24 to 36 times 2006 EBITDA.

"We are taking our rating to a neutral as we had believed the catalyst would be surfacing EPS growth once the struggling Shop at Home business was divested," according to the note released today.

"While we endorse the view that traditional media needs to find a way to participate in the faster growing Internet arena, this deal concerns us just enough that we believe the stock, after a likely negative reaction, is likely to trade in range until traction is proven."

While Merrill Lynch analysts like Scripps' Shopzilla -- a comparison-shopping site -- they note the business model differs from the latest acquisition. USwitch generates revenues from commissions from service providers to whom uSwitch delivers news customers.