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Discovery buys Scripps Networks for $14.6 billion

31 Juillet 2017

The agreement to buy Scripps at $90 per share is a 34% premium above the 18 July closing price of the Tennessee-based company.

The tie-up is a bet that bigger is better as the television industry is upended by cord-cutting and the rise of "skinny" online TV bundles from the likes of Hulu, YouTube, Sling TV and others.

Although smaller, Scripps has an especially valuable asset in HGTV, which was the fourth-most watched United States network in prime time this year, with an average of 1.51 million viewers a night through July 16, according to Nielsen data.

The companies on Monday said they will produce approximately 8,000 hours of original programming each year, and possess 300,000 hours of library content.

The deal will create a must-buy network group for advertisers interested in targeting women and help the network command more premium ad rates. Additionally, the combination will be home to five of the top pay-TV networks for women and will account for over a 20% share of women watching primetime pay-TV in the U.S.

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. Buying Scripps could also help Discovery to boost its global sales, which now account for half of its annual revenue. As a combined company, Discovery claims it delivers 7 billion short-form video streams monthly.

Discovery Communications said the combined company will account for almost 20 per cent of the ad-supported TV viewership in the U.S., bringing together popular TV channels including the Discovery Channel, TLC and Animal Planet, with Scripp's HGTV, Food Network and Travel Channel.

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The deal could put pressure on other media companies, from AMC Networks to Viacom Inc., that must defend their turf on the cable dial.

In a business where size matters more than ever, two of the smaller owners of cable TV channels are getting bigger together. With Scripps off the market, there is one less potential partner for them to join forces with in the battles ahead.

Since news of Discovery's talks started, Discovery is up nearly 3%, while Scripps is up nearly 30%.

U.S. Networks' revenues for the second quarter increased 2% to $890m, driven by 4% distribution growth and relatively flat advertising growth.

"We believe that by coming together with Scripps, we will create a stronger, more flexible and more dynamic media company", said David Zaslav, president and CEO of Discovery, in a statement announcing the deal.

"Well, with Q2 results like this, we could see why there's a deal", Ryvicker wrote in a note Monday morning.

Discovery said second-quarter revenue rose 2% to $1.75 billion, shy of analysts' estimates.

Discovery buys Scripps Networks for $14.6 billion