(Financial Times) – Discovery Communications is buying Scripps Networks Interactive in a $14.6bn deal that brings the channels TLC, Animal Planet, HGTV and the Food Network under the same roof, at a time when the cable industry is being reshaped by consolidation and digital viewing.
The cash and stock deal values Scripps at $90 per share, a 34 per cent premium to where the stock was trading on July 18, before news of a potential sale was first reported.
Scripps shareholders will receive $63 a share in cash and $27 a share in Discovery’s Class C common stock, based on its July 21 closing price. Discovery will assume Scripps’ $2.7bn in net debt. After closing, Scripps shareholders will own about 20 per cent of the company, with Discovery shareholders holding the rest.
Discovery, whose market capitalisation is $15.7bn, has the backing of cable billionaire John Malone and the Newhouse family. The company brought in $6.5bn in revenue last year. Scripps, whose market valuation had risen to more than $11bn in recent days, reported $3.4bn in sales in 2016.
“We believe that by coming together with Scripps, we will create a stronger, more flexible and more dynamic media company with a global content engine that can be fully optimised and monetised across our combined networks, products and services in every country around the world,” said David Zaslav, Discovery Communications chief executive.
The decision to bring together Scripps’s lifestyle channels, which draw a heavily female audience, with Discovery’s reality and factual programming, was fuelled by sweeping changes in the media business that extend from New York and Hollywood to Silicon Valley. Together, their channels attract nearly 20 per cent of advertising-supported pay-TV viewership in the US.
Cable and broadband operators are combining and investing in content. TV viewership has eroded for many channels and the audiences advertisers are keen to reach are increasingly turning to digital media.
Discovery hopes adding Scripps’ networks and content to its own will give it leverage in negotiations with distributors for the lucrative subscriber fees they collect from the companies that carry their channels. It also hopes to extend both companies’ programming to new digitally delivered TV bundles and to platforms like Facebook and Snapchat that have begun buying video content.
The combined company could also offer its own digital subscription service. And Discovery, which has undertaken an aggressive overseas expansion in recent years, could roll out Scripps shows and networks across its international footprint.
Scripps and Discovery have flirted with combining before, most recently in 2014, but those talks ended when the Scripps family, which controls about 92 per cent of the company’s voting shares, decided it was not ready to sell. Given the changes in the media landscape, however, the family, which votes as a block, decided the time was ripe for a sale.
Scripps also fielded interest from Viacom, the owner of MTV, Comedy Central and the Paramount film studio. But after considering the offers, the Scripps family elected last week to proceed with Discovery.