Hearst Corporation has made its long anticipated move to buy out other shareholders of Hearst-Argyle Television and take the company private. The offer announced Friday afternoon would pay about 600 million bucks for the 27% of the company currently in public hands. The price of 23.50 per share is a 15% premium over the closing price on Thursday. But, with only about an hour of trading on Friday after the bid was announced, traders pushed Hearst-Argyle stock up more than 23% to a close of 25.22 on expectations that Hearst Corporation will be persuaded to increase its offer before getting the deal done. "The competitive demands of the TV broadcasting industry and changes in the broader media industry, when balanced against the pressures on a public company to deliver short-term results, have convinced us that private ownership of Hearst-Argyle is desirable and will assist Hearst-Argyle in attaining its strategic and business objectives," Hearst Corporation President and CEO Victor Ganzi said in a letter to the directors of Hearst-Argyle. "At the time Hearst invested in Hearst-Argyle, we believed the availability of a public currency would enable Hearst-Argyle to grow through acquisitions, and the transaction where Hearst-Argyle acquired the Pulitzer stations would not have been possible without a public currency. The landscape has changed since that time, and we now believe that Hearst-Argyle should be privately owned," the letter said.
Hearst-Argyle’s board is now expected to form a special committee of independent directors to consider the buy-out bid. They and their financial advisors may negotiate with Hearst Corporation if they don’t think the offer fairly values the company. Hearst-Argyle’s 52-week high of 28.16 was set last April, but its stock price has been beaten down since then along with many other broadcasting stocks. Hearst Corporation currently owns all of Hearst-Argyle’s Class B stock and 52% of the publicly traded Class A shares. It has regularly bought Class A shares on the open market and bought over 300,000 shares from July 31st through August 17th for a total of 6.6 million bucks. According to its most recently SEC filing, Hearst Corporation bought 275,000 shares on August 17th at 21.43 each.
TVBR observation: For a couple of years now analysts have been asking during Hearst-Argyle CEO David Barrett’s quarterly conference calls whether Hearst Corporation planned to take the company private, and he repeatedly answered that it was not up to him what Hearst Corporation did or did not do. But since Hearst Corporation had been an aggressive buyer of Hearst-Argyle stock for years and years, consistently increasing its controlling stake to an overwhelming majority stake, it was clear to many on Wall Street that the time would come when Hearst Corporation would decide to stop taking small bites and bid to swallow the remaining public float all at once. That time is now.