Dis­cov­ery strikes deal for Scripps

Ac­qui­si­tion to meld Shark Week cre­ator, life­style brands

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - THOMAS HEATH

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.

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