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Discovery Communication wins bid to buy Scripps Networks

news August 3, 2017



have reached a deal to purchase for US$14.6 billion on July 31, 2017. The deal combines two TV cable channel companies with mostly lifestyle programming with both having strong brands.

, a major Discovery stockholder, has recommended content industry consolidation. Viacom was in the bidding for Scripps Networks until the fourth week of July 2017, leaving Discovery as the final bidder. The controlling Scripps family members and agreed to vote for the Discovery purchase. Advance/Newhouse is also a major Discovery shareholder.

Discovery plans to pay for the purchase with stock and cash with $63 per share in cash and $27 per share in stock while taking on Scripps' debt. Scripps Networks shareholders will own 20% of Discovery after the transaction close in early 2018. Kenneth Lowe, chair, president and CEO of Scripps, will join the board of directors after the merger is closed.

Twenty percent of ad-supported paid U.S TV will be flowing through Discovery-Scripps according to the two companies. The combined company will run the top five female-viewed pay TV channels (,, , and ) having a 20% share of US primetime female viewers. Additionally, 8000 hours of original programming per year over its 50 channels produced add to a combined library of about 300,000 hours.

The merger is expecting $350 million in cost savings, while allowing the Scripps channels more international opportunities, by taking advantage of Discovery's greater international reach. The additional channels give Discovery more potential in direct-to-consumer and internet delivered TV services like Hulu and PlayStation Vue.

Market analysts have given mixed responses. RBC Capital Markets analyst Steven Cahall wrote in a report, "We view the deal as among the most logical in media. Both are somewhat relatively sub-scale when dealing with distributors, and while their combination may not put them on equal footing with a broadcast network or major sports rights owner, scale matters and should improve network carriage and affiliate negotiations." He also indicated: "Investors have viewed consolidation among smaller players as an eventual inevitability."

MoffettNathanson analyst Michael Nathanson wrote a recent report, which stated: "While there will likely be ample cost synergies, international revenue opportunities and improved relative scale, we don’t think this merger will fundamentally alter the long-term prospects of these companies." He also indicated that Discovery already has too many channels to defend, but would give them the possibility of forming a non-sports channel programming bundle price under $15 per month. Nathanson changed his rating on Scripps to Neutral from Sell and continued his sell rating for Discovery.

"Although we still don't believe that either combination [Discovery-Scripps or Viacom-Scripps] solves the long-term affiliate fee 'issue,' our math at least suggests that Discovery would be the better buyer of Scripps — both from a pro forma leverage and an accretion standpoint," stated Wells Fargo analyst Marci Ryvicker.

The spun off its cable channel based telecasting unit,, in 2008. The Scripps Company is currently pursuing the purchase of that marks a return to the telecasting segment of broadcasting. The E.W. Scripps family controls both Scripps entities.