Hearst Corp. is going to offer about $600 million to purchase the 27 percent minority stake in Hearst-Argyle Television that it does not already own and values at about $2.21 billion.
The offer, announced late Friday afternoon, adds up to $23.50 per share, a 15 percent premium compared to the Thursday closing price of $20.46 per share for the approximately 94.3 million shares outstanding at the end of June.
Hearst-Argyle stock opened trading Monday on the New York Stock Exchange at $24.86 per share, down 36 cents or 1.43 percent, from Friday’s close of $25.22.
In its quarterly earnings call July 26, Hearst-Argyle President and CEO David Barrett still was expressing confidence that the company, which owns 26 TV stations and operates three others that reach a combined total of about 18 percent of the TV homes in the country, would show “value creation for our shareholders.”
The move to privatization is not unexpected. In April, Bear Stearns had tagged Hearst-Argyle as a candidate for “corporate parent take-outs.”
Bear Stearns analyst Victor Miller Monday suggested that the Hearst-Argyle move would provide a lift for the stocks of some TV groups, including NexStar, that have put themselves up for sale.
“However, the real issue is whether investors believe there is a significant change in the industry take-out multiples given the disruption in the credit markets and whether the majority of the outstanding shares will vote for the $23.50 offer price,” Mr. Miller said in a note distributed Monday.
Parent company Hearst also owns newspapers, including the Houston Chronicle and San Francisco Chronicle, and magazines ranging from Seventeen and Cosmopolitan and Esquire.
Based on 94.3 million shares outstanding at the end of June, the Hearst offer values the company at $2.21 billion.
Hearst-Argyle owns 29 television stations that reach about 18 percent of the U.S. viewers.
In afternoon trading Hearst-Argyle shares added $2.09, or 10.2 percent, to $22.55. The stock has ranged from $18.70 to $28.16 over the past year.
[Read On: TV Week]