Discovery strikes deal for Scripps
Acquisition to meld Shark Week creator, lifestyle brands
Discovery Communications on Monday announced it has agreed to buy Scripps Networks Interactive in a $14.6 billion deal that creates a lifestyle programming engine with a global reach as cable companies navigate a disrupted media environment.
Scripps shares rose 50 cents, or 0.6 percent, to close Monday at $87.41 while shares of Silver Spring, Md.-based Discovery fell $2.20, or 8 percent, to close at $24.60.
The deal called for Scripps shareholders to receive $90 per share, or about $11.9 billion, a 34 percent premium above where Scripps stock was valued when the talks were first reported nearly two weeks ago.
The $90-per-share price comprises $63 in cash and $27 per share in Class C common shares of Discovery stock. Scripps’ debt is included in the deal, which brings its value to $14.6 billion.
Analysts had been generally positive about a merger since the news of talks first leaked. Several saw it as a smart move because the companies need the scale and digital chops to negotiate with distributors in today’s fastmoving media world.
The deal “future proofs our brands on a global basis,” Scripps Chairman Kenneth Lowe said. He called the agreement “an unmatched opportunity for Scripps to grow its leading lifestyle brands across the world and on new and emerging channels including short-form, direct-to-consumer and streaming platforms.”
Discovery is known for its male-targeted, over-the-top programming such as Shark Week, which this year included a race involving Olympian Michael Phelps and a computer-generated great white, and its man-vs.-nature shows such as Deadliest Catch and
Bering Sea Gold, about prospecting for gold in the frigid waters off Alaska.
Scripps Networks offers a portfolio of shows that appeal to the lucrative female demographic, including those in the do-it-yourself genre fea-
● tured on the Food Network, HGTV, the Travel Channel and the Cooking Channel.
Discovery is also known for its rigid cost discipline and huge international footprint — 2.8 billion viewers in 200 countries and 40 languages — that would complement Scripps Networks’ nascent global distribution.
“When you put us together, we are about 20 percent viewership on cable,” said Discovery chief executive David Zaslav, one of the highestpaid public company executives. “As people are choosing content to put on a platform, our content together way overdelivers.”
“While cost synergies are pretty obvious to us, we continue to believe the most compelling industrial logic is from international distribution,” RBC Capital Markets analyst Steven Cahall said in a note Friday.
Discovery could launch “ad-supported networks with [Scripps] content in dozens of international markets,” Cahall said. “We think $3 [million] to $10 million in annual revenue per network is not unreasonable.”
Cahall also said the combined company would create leverage with distributors that would be an improvement “versus where the companies sit currently.”
Discovery has a market capitalization of $11.4 billion. It has more than $6 billion in annual sales and 7,000 employees.
Both companies have strong balance sheets. Each produces large net profit margins, with Discovery earning a net profit of $1.2 billion last year. Scripps Networks’ net profit was $673 million.
Scripps Networks has 3,600 employees. Its shares have been on a tear in recent years, nearly doubling since pre-financial-crisis days.
Scripps Networks Interactive was spun out of the longtime Cincinnati-based newspaper chain and media service E.W. Scripps Co. in 2008.
Advance Publications, the privately held media company owned by the Newhouse family, owns a large share of Discovery stock.
A replica of a Tyrannosaurus rex is displayed in the lobby of Discovery Communications headquarters in Silver Spring, Md., on Monday. Discovery Communications announced Monday that it has agreed to buy Scripps Networks Interactive in a $14.6 billion deal.