BY Richard Summerfield
Consolidation and changing viewer trends are having a dramatic effect on the television industry, with landmark deals unveiled regularly. This week, it was announced that Discovery Communications and Scripps Networks Interactive are to merge in a cash and stock deal worth $14.6bn, or $90 per share. Discovery will be paying a 34 percent premium on Scripps stock price on 18 July, the day before news of a potential deal surfaced.
The transaction is expected to generate synergies of around $350m, according to a joint statement, and could include significant job cuts. Scripps shareholders will receive $63 a share in cash and $27 a share in Discovery’s Class C common stock, based on its 21 July closing price. Discovery will also assume Scripps' existing net debt of $2.7bn.
"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. Our business is about great storytelling, authentic characters and passionate super fans. 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 optimized and monetized across our combined networks, products and services in every country around the world," said David Zaslav, president and CEO of Discovery Communications.
"Through the passion and dedication of our incredible employees, and with the support of the Scripps family, we have built a lifestyle content company that touches the lives of consumers every single day," said Kenneth W. Lowe, chairman, president and CEO of Scripps Networks Interactive. "This agreement with Discovery presents 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."
The deal is the latest move in an increasingly active television industry which is trying to come to terms with a new paradigm. TV ratings and advertising revenue are in decline, and as more consumers choose to ‘cut the cord’, turning to streaming services such as Netflix and Amazon Prime, companies are looking to secure content deals. Once the merger is complete, the company will offer 300,000 hours of content and enjoy a 20 percent share of ad-supported cable audiences in the US.