Discovery forges cable giant in $11.9B deal with Scripps

LOS ANGELES — Discovery Communications and Scripps Networks Interactive have reached an $11.9 billion deal to combine, a move aimed at creating a bulwark to withstand the challenges facing the television industry.

Discovery plans to acquire Scripps — the owner of HGTV, Food Network and the Travel Channel — in a cash-and-stock transaction that was announced early Monday. The combination would create a bulked-up programming company commanding nearly 20 percent of cable viewership in the U.S. and significant growth prospects internationally.

The proposed marriage of the two cable programming companies comes after two failed attempts to merge. However, this time the companies were spurred to combine because it has become increasingly difficult for medium-sized independent media firms to on their own.

The Discovery-Scripps combination would create a more formidable entertainment company, one with several must-have cable TV channels. The deal is expected to close in early 2018.

“This is an exciting new chapter for Discovery. Scripps is one of the best run media companies in the world with terrific assets, strong brands and popular talent and formats,” David Zaslav, chief executive of Discovery, said in a statement announcing the deal.

Both Scripps — which boasts among the country’s most popular lifestyle channels — and Discovery have been grappling with lower TV ratings and increased competition for viewers. Consumers have been dropping their pay-TV subscriptions in favor of lower-cost digital streaming options, including Hulu, Netflix and Amazon.com.

Those subscriber defections threaten a key source of revenue. Television distributors pay affiliate fees for the rights to carry Scripstand ps’ and Discovery’s channels, and the fees are calculated based on the number of subscribers that receive the channels.

Discovery includes Animal Planet, Discovery, TLC, the crime channel ID (Investigation Discovery) and a stake in the Oprah Winfrey Network. The largest individual voting shareholder of the company, based in Silver Spring, Md., is cable mogul John Malone, who now lives on a sprawling ranch in Colorado.

Scripps shareholders will receive $90 per share under the terms of the merger agreement. Of that, $63 will be in cash and $27 per share will be in Discovery’s Class C common stock. The deal price represents a 34 percent premium over Scripps’ share price on July 18, before news of the negotiations between the two companies leaked in news reports.

Discovery would assume Scripps’ $2.7 billion in debt.