Discovery to acquire Scripps Networks
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[July 31, 2017]
By Jessica Toonkel
NEW YORK (Reuters) - Discovery
Communications Inc is acquiring Scripps Networks Interactive for $14.6
billion in a deal that is expected to boost the combined company's
negotiating leverage with pay TV operators at a time when more people
watch video online, the companies said on Monday.
The acquisition, which was completed last night, brings together
Scripps' largely female audience of lifestyle channels such as HGTV,
Travel Channel and Food Network with Discovery's Animal Planet and
Discovery Channel, which primarily has male viewers.
With the acquisition, Discovery can cut costs and use Scripps's shows to
further its international reach. The combined company's larger
programming slate might also provide leverage in negotiations for
inclusion in skinny bundles, or economy-priced cable packages that offer
fewer channels than a standard contract.
The combined company will have 20 percent total cable viewership,
according to a recent Barclays note. That will strengthen its
negotiating stance when renewing contracts with distributors. By adding
Scripps programming, Discovery could also launch its own "skinny bundle"
of networks at a low cost.
U.S television networks and cable providers are under pressure as more
viewers watch their favorite shows and movies on phones and tablets.
There is also increased competition for viewers from streaming services
such as Netflix Inc and Amazon.com Inc.
Scripps has been considered a takeover target since the Scripps family
trust that controlled the company was dissolved five years ago.
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The Discovery Communications headquarters building is seen in Silver
Spring, Maryland December 3, 2009. REUTERS/Jim Bourg/File Photo
This marks at least the third time that Discovery, whose
shareholders include cable magnate John Malone, has tried to buy
Scripps. Discovery outbid Viacom Inc for Scripps, which Reuters
first reported Wednesday.
Investors are largely positive on the deal for the synergies the
combined company will see and the leverage it will have with pay TV
partners. Since news of Discovery's talks started, Discovery is up
almost 3 percent, while Scripps is up almost 30 percent.
But many analysts question how the combined company will compete
long-term as viewers keep cutting cords to cable providers and
advertising and ratings decline.
"If there were no secular concern, this deal would be a slam dunk,"
wrote Barton Crockett an analyst at FBR Capital Markets, on July 27.
While ratings for both companies have been solid, "investors don't
trust that this can continue, and we're not sure what turns that
Discovery is paying 70 percent cash and 30 percent stock for
(Editing by David Gregorio)
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