Analysts: Scripps Networks to Use New Financing for Further Stock Buybacks
The cable networks company could also buy Tribune's 31 percent stake in Food Network following a $500 million debt deal, Wunderlich Securities' Matthew Harrigan predicts.
NEW YORK - Cable networks owner Scripps Networks Interactive will use new funds from a $500 million debt issue for stock buybacks and potential deals, Wall Street analysts said Tuesday.
Wunderlich Securities analyst Matthew Harrigan said in a report that a senior note offering from the owner of HGTV, Food Network and Travel Channel is "affording [it] further latitude for [stock] buybacks or strategic M&A that could emcompass acquiring Tribune's 31 percent interest in Food Network." He estimated the current value of the stake at $1.6 billion.
But Barclays Capital analyst Anthony DiClemente argued that for now, such a deal is likely too expensive for the firm.
"While Scripps Networks' debt raise could be viewed as pre-financing for a potential buy-in of Tribune's 31 percent stake in the Food Network, we believe that is unlikely," he wrote. "We estimate the current ask for the outstanding portion of Food is likely between $1.5 billion and $1.8 billion, far in excess of Scripps' available cash reserve, even after the capital raise."
Instead, DiClemente suggested that the company "wisely took advantage of attractive rates" in the debt market to help fund the acquisition of UKTV, which it announced earlier this year. The new debt deal also gives DiClemente "more confidence that the pace of the [stock] buyback will meet or even exceed our expectations."
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