Hearst Corp. on Friday announced a bid to scoop up the remaining public shares of its Hearst-Argyle Television station group for about $600 million, but investors bid up the broadcaster’s formerly slumping stock well past Hearst’s $23.50 per-share offer.
Hearst Corp.’s offer for the 27% of Hearst-Argyle that it doesn’t already own came as no surprise to broadcasting biz observers. There have long been rumblings that the parent concern would move to buy back the publicly held stake in the station group, created in mid-1997 by the merger of Hearst’s privately held stations with the publicly held Argyle Television.
After trading around $20 a share in recent months, news of Hearst Corp.’s offer sent Hearst-Argyle shares soaring $4.76, or 23.3%, to close at $25.22. Broadcasting biz observers said Hearst-Argyle’s strong collection of 26 large- and midsize-market stations, most of them ABC and NBC affiliates, could fetch a premium of as much as 30% over its recent trading price. Hearst’s initial offer was a 15% premium over Hearst-Argyle’s Thursday closing price of $20.46.
Hearst said it intended to launch its tender offer for the shares in September. But after Friday’s runup the company will be forced to sweeten its offer. Biz watchers said Hearst Corp. was moving opportunistically at a time when the stock had been in a slump in the hopes of making the station group a wholly owned subsidiary again just in time for the group’s stations’ coffers to fill with ad dollars from the 2008 political campaigns and from the summer Olympics.
Hearst Corp. revealed the buyback bid in a letter sent Friday to the Hearst-Argyle board of directors. The letter hinted that recent volatility on Wall Street made it a good time for the station group to go private again. Hearst-Argyle is expected to form a special committee of its directors to consider the Hearst offer.
“Recent events in the capital markets have placed a meaningful premium on liquidity,” Hearst Corp. CEO Victor Ganzi said in the letter. Citing competitive demands on broadcast TV stations and changes in the marketplace overall, the Hearst board has become convinced that “private ownership of Hearst-Argyle and will assist (the group) in attaining its strategic and business objectives.”
In its most recent earnings report, for the first half of this year, Hearst-Argyle logged revenue of $362.4 million and net income of $21.2 million.