Picture ‘Perfect’

Hearst-Argyle sez Pulitzer pact a natural segue

Hearst-Argyle Television defended its winning $1.8 billion bid for Pulitzer Publishing’s TV and radio stations Tuesday by deeming the fit so “perfect” that the merging of broadcast properties into the country’s second-largest, non-network-owned station group will be “seamless.”

Bob Marbut, chairman and co-CEO of Hearst-Argyle, added that, after being only “mildly dilutive” in the first year, the acquisition of Pulitzer Broadcasting will become “accretive,” meaning that earnings will grow faster than they would have without the acquisition.

The deal, which makes Hearst-Argyle the second-largest NBC affiliate group, while preserving its status as the largest ABC affiliate group, calls for Pulitzer to spin off its newspaper operations into a separate company.

Common denominator

Pulitzer will then merge what’s left into Hearst-Argyle in exchange for $1.15 billion of common stock. Hearst-Argyle will also pick up some $41 million in working capital from Pulitzer while assuming $700 million in debt, thus leaving Pulitzer Corp., the surviving newspaper entity, debt-free.

“This is our defining moment,” Marbut told Daily Variety in reference to Hearst-Argyle’s public commitment to increase its national TV coverage from 11% to 20%. Pultizer’s adding nine TV network affiliates and a handful of radio stations to the mix, thus creating a 24-TV-station and seven-radio-station group, takes the acquiring company more than halfway toward its ambitious goal.

Cutting the apron strings

Marbut said the acquisition also addresses such issues as Hearst-Argyle’s over-reliance on ABC and the East Coast. Once the merger closes, anticipated by year-end, the company should obtain only about half of its revenues from ABC, compared with 39% from NBC and 5% from CBS.

Geographically, the mix will reduce Hearst-Argyle’s revenue stream from the East to 40%, while increasing contributions from the South and Midwest to about 25% apiece.

Hicks, Muse, Tate & Furst, the Dallas-based investment firm, was believed to have been a close runner-up for the properties it would have reportedly paid for with stock of Hicks, Muse-controlled Chancellor Media Corp. Erroneous rumors that it was willing to pay in excess of $2 billion for the Pulitzer assets caused Chancellor stock to fall considerably last week.

On Tuesday, Pulitzer’s stock fell $2.94 to $87.06, no doubt reflecting surprise that the rumors weren’t true, while Hearst-Argyle’s stock rose 69¢ to close at $34.94.