Discovery Communications Inc. has concluded to buy Scripps Networks Interactive Inc. for $11.9 billion, a gamble that a incomparable footprint in lifestyle programming will assistance it continue cable-TV upheaval.
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A bigger portfolio of channels that specialize in supposed comfort-food radio would give a sum association an corner in talks with advertisers, who covet womanlike and younger viewers gravitating to shows such as “Property Brothers” and “House Hunters” on HGTV and “Shark Week” on Discovery Channel.
A vicious mass of programs about home renovations, cooking contests and a like put Discovery and Scripps in a position to offer a web-TV gold directly to consumers, who are “cutting a cord” to wire during a quick gait and branch to slimmed-down offerings from Hulu and other competitors.
It will also give a sum organisation some-more heft with programming distributors that are underneath vigour to quell monthly wire fees upheld by to media companies.
News of a understanding overshadowed a companies’ quarterly benefit reports, both of that fell brief of Wall Street expectations. That stirred Marci Ryvicker, an researcher during Wells Fargo, to put out a note titled: “Well, Good Thing They’re Combining Because Q2 Results Were Underwhelming.”
Discovery shares sealed 8.2% reduce during $24.60 on Monday, while Scripps rose 0.6% to $87.41.
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Under a terms of a agreement, announced Monday morning, Scripps shareholders will accept $90 a share, $63 of that will be in money and $27 a share in Class C Common shares of Discovery stock. The cost is a 34% reward to a turn where Scripps shares were trade before The Wall Street Journal reported that a companies were in talks.
Including Scripps’s debt, a understanding is valued during a sum of $14.6 billion.
The seeds of Monday’s understanding were planted final November. Discovery Chief Executive David Zaslav and Scripps CEO Ken Lowe participated in a row contention about family values in a media during a Vatican, where they met with Pope Francis. The dual have been tighten friends for 3 decades and mostly spend time together in East Hampton, N.Y.
Over cooking in Rome, a span discussed a hurdles confronting their companies and initiatives in removing calm true to a consumer.
Mr. Zaslav’s seductiveness in Scripps increasing when he saw how strongly Scripps programminghad achieved in Latin America. Executives during Discovery’s Home Health channel progressing this year suggested that Mr. Zaslav strech out to Mr. Lowe to acquire some-more content, though Mr. Zaslav already was meditative of a deeper relationship, a chairman with believe of a matter said.
When Scripps executives in May started to put out feelers to intensity suitors, including Viacom Inc., Discovery approached them shortly after, people sensitive with a matter said. At a Allen Co. discussion in Sun Valley, Idaho, early final month, Mr. Zaslav and Mr. Lowe were inseparable.
Last week, Scripps sensitive Viacom that it was flitting on a offer to concentration on Discovery. Mr. Zaslav and his mother spent Saturday during Mr. Lowe’s Knoxville, Tenn., home, where they had lunch as Scripps’s house contemplated a deal.
Discovery owns networks including Discovery Channel, Animal Planet and TLC. Scripps operates HGTV, Cooking Channel and Food Network among others.
The dual companies criticism for 13% of altogether wire viewership though accept only 7% of a monthly wire fees consumers pay, according to RBC Capital Markets.
The joined association will control 4 of a 5 vital wire networks with a top percentages of womanlike viewers — TLC, HGTV, Investigation Discovery and Food Network, according to Nielsen. Advertisers wish womanlike viewers since they tend to have a large contend in domicile purchases.
Discovery pronounced it would be means to enhance Scripps’s channels into some-more abroad markets, that could assistance beget poignant additional revenue. The sum association is also touting a short-form video production, that will assistance it benefit some-more viewers and ad dollars on social-media platforms.
The understanding could put vigour on other media companies that contingency urge their territory on a wire dial. Industry experts contend AMC Networks Inc. could be a subsequent constrained target. It isn’t partial of a large firm that owns promote or sports networks, that wire distributors find many formidable to drop. AMC didn’t immediately respond to a ask for comment.
The understanding will lift a form of Mr. Zaslav, who had a roughly two-decade career during NBC before fasten Discovery in 2007. He has led a transition of Discovery from being essentially famous for a critical educational transport to a brew of documentary-style programming and over-the-top existence TV — shows like “Here Comes Honey Boo Boo” and “Naked and Afraid.” Lately, a pendulum during a association has swung behind to calm with aloft aspirations.
He has launched new channels, including crime-focused Investigation Discovery, that has turn a outrageous strike with womanlike viewers. And he has been as assertive as any media CEO in general expansion: Operations outward a U.S. accounted for 47% of a company’s $6.5 billion in sum income final year.
Discovery pronounced second-quarter income rose 2% to $1.75 billion, bashful of analysts’ estimates. Scripps lowered a income superintendence and reported second-quarter U.S. promotion sales expansion of 2.2%, that also fell brief of expectations.
The understanding is approaching to tighten by early 2018, tentative capitulation by shareholders and regulators.
Mr. Zaslav is a tighten associate of John Malone, a wire noble who owns a scarcely one-third voting interest in Discovery and sits on a board.
Mr. Malone, who has poignant interests in companies from Liberty Media Corp. to Charter Communications Inc., has been a pushing force in a industry’s mergers and acquisitions and has talked adult a need for tiny players in a calm universe to merge, quite as wire and broadband providers have left by their possess call of large deals.
Charter acquired Time Warner Cable in 2016. ATT Inc. concluded final year to buy Time Warner Inc.
Mr. Zaslav didn’t order out other deals. “We’re not out of bullets. We still have room to do some resourceful purchases,” he said.
Discovery is securing a squeeze of Scripps after some-more than one unsuccessful try over a final decade. Three years ago, talks between a dual companies pennyless down, in partial since a Scripps family didn’t seem prepared to sell.
The family, that collectively controls 91.8% of Scripps voting shares, entered into an agreement to opinion in preference of a deal, as did Mr. Malone and a Newhouse family, that is also a vital Discovery shareholder.
After closing, Scripps shareholders will possess about 20% of Discovery’s shares and Discovery investors will possess 80%. The merger is approaching to emanate about $350 million in cost assets and supplement to practiced benefit in a initial year, Discovery said.
Mr. Lowe, who was already formulation to step down in 2019, is approaching to join Discovery’s board.
Write to Joe Flint during [email protected] and Sarah Rabil during [email protected]
(END) Dow Jones Newswires
July 31, 2017 20:36 ET (00:36 GMT)