E.W. Scripps Stock Skyrockets 40% on Sinclair Stake. What Could Happen Next.

Sinclair is one of the largest TV station operators in the U.S. (Andrew Harrer/Bloomberg)

Key Points

• Sinclair acquires a stake of 8.2% in E.W. Scripps, purchasing 6.3 million shares, with intentions to buy out the local media rival.
• Scripps’ shares rise sharply following the disclosure.
• Scripps’ board will evaluate offers but warns against opportunistic actions by Sinclair.

Broadcasting conglomerate Sinclair has taken a stake of 8.2% in E.W. Scripps with the aim of buying out its local media rival.

Sinclair has “engaged in constructive discussions” with Scripps over the last several months regarding a potential merger, the company disclosed in a Securities and Exchange Commission filing Monday. It purchased 6.3 million Scripps shares earlier this month.

Sinclair added that it would pay a premium around three times Scripps’ recent stock price. Scripps shares rose 40% on Monday to $4.30. Sinclair stock was up 6.8% to $17.18.

Scripps, however, may not be ready to sell just yet. In a statement, the company said its board and management would evaluate offers and do what is in the best interest of shareholders, employees, and communities and audiences around the U.S. However, it warned of opportunism by Sinclair.

“The company’s board has and will continue to evaluate any transactions and other alternatives that would enhance the value of the company and would be in the best interest of all company shareholders,” Scripps added. “Likewise, the board will take all steps appropriate to protect the company and the company’s shareholders from the opportunistic actions of Sinclair or anyone else.”

A financial mismatch between the two companies could help push a deal over the line. Sinclair closed last Friday with a market capitalization of $1.1 billion, while Scripps was worth just $272 million. The former company has expressed interest in dealmaking amid a more merger-friendly regulatory environment and said it could complete a deal without any outside financing.

Sinclair, which is one of the largest television operators in the country, argued in the filing Monday that increasing its scale would strengthen local reporting and allow it to better compete for advertising share and programming.

“Further scale in the broadcast television industry is essential to address secular headwinds and compete effectively with larger-scale big-tech and big-media players, as well as major broadcast groups,” the company said.

Write to Nate Wolf at nate.wolf@barrons.com