Take two: Hearst Corp. bids again to take Hearst-Argyle private


Shareholders weren’t receptive in 2007 when Hearst Corporation offered to buy up all of the shares of Hearst-Argyle Television for $23.50 each. But much has changed in the television business since then. Now, Hearst Corp. is offering $4.00 per share, which is well above where the stock has been trading. As you would expect, Hearst-Argyle shares shot up on the news, gaining 92.8% for the day to close at $4.03.

Hearst Corporation announced Wednesday that it intends to make a tender offer for all of the outstanding shares of Series A Common Stock of Hearst-Argyle Television that it doesn’t already own for $4.00 per share in cash. The offer price represents a premium of approximately 91% over the closing price of the shares on Tuesday, and a premium of approximately 125% above the average closing price of the shares for the 20 trading days immediately preceding.

Hearst Corp. already owns approximately 82% of Hearst-Argyle. Assuming the tender takes that past 90%, Hearst Corp. will use a short-form merger to squeeze out any remaining shareholders at the same $4.00 price. The tender is expected to commence in April, but the dates have not been announced.

In a letter to Hearst-Argyle’s directors, Hearst Corp. CEO Frank Bennack Jr. said several factors have influenced the company to halt its public market accumulation of Hearst-Argyle shares and seek, instead, to try again to take the TV company private. “First, the substantial recent changes in the financial markets as well as in the media markets in which Hearst-Argyle operates have focused our attention on Hearst-Argyle’s capital structure, its relatively high level of indebtedness and its ability to refinance its debt on acceptable terms as it matures. We believe that if Hearst-Argyle were a wholly-owned subsidiary of Hearst it would more readily be able to navigate the troubled waters in which we find ourselves. Second, we have held discussions with the representative of a large unaffiliated shareholder of Hearst-Argyle, Private Capital Management, L.P. We believe that accounts advised by Private Capital hold over 7 million shares of Series A Common Stock. In our discussions, we were told that Private Capital is supportive of a transaction of the type we are proposing today. While Private Capital doubtless will wish to take into account your views in deciding how to respond to our tender offer, we understand from our communications that Private Capital is in principle supportive of a transaction at the price we now propose,” Bennack wrote.

Hearst-Argyle Television owns 26 television stations, and manages an additional three television and two radio stations.

RBR/TVBR observation: It appears some traders are expecting Hearst Corp. to be forced to raise its bid. We wouldn’t bet on that, since it appears to have already lined up the purchase of enough shares to make this a done deal.