TV-station owner E.W. Scripps Co. agreed to buy ION Media Networks Inc. for US$2.65 billion with help from Warren Buffett’s Berkshire Hathaway Inc., moving aggressively to expand its footprint in a challenged but still lucrative industry.

Berkshire is making an investment of US$600 million in preferred equity in Scripps to help finance the deal, Scripps said in a statement Thursday. Berkshire also received a warrant to buy as many as 23.1 million Class-A Scripps shares at US$13 each. Scripps stock closed Wednesday at US$10.47.

Scripps shares soared as much as 43 per cent to US$15 in New York trading on news of the deal for ION’s TV stations and broadcast network, which was reported earlier Thursday by the Wall Street Journal. The stock was up 16 per cent to US$12.14 at 12:19 p.m.

Cincinnati-based Scripps will roughly double its roster of 60 TV stations with the addition of closely held ION, which is controlled by Black Diamond Capital Management. It plans to divest 23 ION stations to win regulatory approval for the deal.

Scripps operates networks including Court TV through its Katz division and also runs Newsy, a multiplatform news provider. ION, based in West Palm Beach, Florida, runs a national network that shows crime programming such as “Law & Order.”

Scripps said the combination would generate savings of as much as US$500 million over six years, reaching an annual run rate of US$120 million, mainly through avoiding carriage fees it now pays to other broadcasters for the Katz networks. As current contracts expire, Scripps plans to migrate its programming to ION’s digital subchannels.

Cord cutters, who tend to be younger viewers that advertisers struggle to reach, are increasingly watching free over-the-air broadcast channels with digital antennas, Scripps Chief Executive Officer Adam P. Symson said on a conference call.

Symson said the ION deal will help Scripps capture a growing share of the national advertising market, since Scripps has largely focused on local TV broadcasting.

“Over-the-air might not be sexy, at least not yet, but ION and Katz are proof that there is a lot of value being created here,” Symson said.

TV Consolidation

The deal is the latest sign of consolidation in the TV industry. Stations can be lucrative because they usually generate a windfall of political advertising dollars during election seasons. Bulking up also lets station owners generate more efficiencies to counter the steady loss of traditional TV viewership to streaming platforms.

In 2018, Nexstar Media Group Inc. agreed to buy Tribune Media for US$4.1 billion, creating the largest owner of local TV stations, and Gray Television Inc. struck a deal to acquire Raycom Media Inc. for US$3.65 billion. Apollo Global Management agreed last year to buy a majority stake in Cox Enterprises Inc.’s television broadcasters.

Buffett has provided funding for several transactions in recent years. In 2019, Berkshire helped Occidental Petroleum Corp. finance its US$37 billion takeover of Anadarko Petroleum Corp., receiving preferred stock and warrants in return.

Buffett’s Berkshire also has some familiarity with the broadcast side of the media world. He bought a Miami television station as part of a swap for Graham Holdings Co. stock in 2014 and also bet on Capital Cities/ABC Inc. before it was purchased by Walt Disney Co. in 1996.

But Buffett has recently pulled back from media, striking a deal earlier this year to offload his network of local newspapers, including his hometown Omaha World-Herald, to Lee Enterprises Inc. As part of the transaction, Berkshire agreed to lend US$576 million to Lee.

The Berkshire investment in Scripps was led by one of Buffett’s top deputies, Ted Weschler. He’s helped Buffett with media investments before, playing a role in Berkshire’s deal with Media General Inc. for a range of newspapers. He eventually helped oversee the relationship with Lee.