The parent company of Discovery Channel and Animal Planet, Discovery Communications, is forking out $14.6 billion, or $90 per share, based on Discovery's Friday, July 21 closing price, to purchase Scripps Networks, the parent company of the Food Network and Travel Channel. The deal will combine two major US television companies, further consolidating the media industry. The transaction is expected to close by early 2018.
Discovery and Scripps combined share an estimated 20 percent of ad-supported television viewership in the United States. The benefit of combining, the companies said, is that it would allow them to compete better against online options, such as Netflix and Amazon, which are quickly gaining popularity.
Additionally, the combined company will be home to five of the top pay-TV networks for women and will account for over 20% share of women watching primetime pay-TV in the U.S. Discovery sees strong opportunities to strengthen its existing global female networks with select content from Food Network, HGTV and all the Scripps brands.
Cable television companies face falling subscriber numbers, and to compete with platforms like Netflix, are releasing their own online platforms, and also cheaper television packages with fewer channels, to entice viewership.
"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," said David Zaslav, President and CEO, Discovery Communications.
"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," Zaslav added.
Kenneth W. Lowe, Chairman, President & CEO, Scripps Networks Interactive, said, "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. 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 combination will extend Scripps' brands, programming and talent to a broader international audience through Discovery's global distribution, sales and languaging infrastructure. Scripps also has a strong position in key international growth markets, including the U.K. and Poland, and will help fuel Discovery's existing content pipeline in growth areas like Discovery's Home and Health network in Latin America.
Discovery's added scale, content engine and multiple brand offerings will present a compelling opportunity for new digital distribution partners, including mobile, OTT, and direct-to-consumer platforms and offerings.
Moffett Nathanson analysts told the BBC there could be advantages for Discovery following the merger, but the long-term issues faced by the companies probably won't go away: "While there will likely be ample cost synergies, international revenue opportunities and improved relative scale, we don't think this merger will fundamentally alter the long-term prospects of these companies."
There was talk of the two companies combining in 2014, and more recently when Scripps fielded interest from Viacom, the owner of MTV, Comedy Central and the Paramount film studio. But after considering the options, Scripps decided the best option was to merge with Discovery.