Discovery acquires Scripps Networks Interactive for $14.6bn in move to reach one-fifth of pay-TV viewers in US

Scripps owns Food Network

Discovery Communications has signed a deal to buy Scripps Networks Interactive in a cash-and-stock transaction valued at $14.6bn, a deal that will push the TV giant's reach to nearly 20% of ad-supported pay-TV audiences in the US, it claims.

The transaction, expected to close in early 2018, will see Discovery pay Scripps shareholders approximately $90 a share, representing a 34% premium to the company’s most recent closing price.

It will see Discovery’s assets, which includes Discovery Channel, TLC, Animal Planet, and Eurosport, combined with Scripps’ channels, including HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country in one umbrella company.

Scripps also owns TVN, a multi-platform provider of entertainment, lifestyle and news content in Poland; UKTV, an independent commercial joint venture with BBC Worldwide; Asian Food Channel, the first pan-regional TV food network in Asia; and lifestyle channel Fine Living Network.

The combined company will produce approximately 8,000 hours of original programming annually, be home to approximately 300,000 hours of library content.

The media conglomerate will reach nearly one fifth (20%) of ad-supported pay-TV audiences in the US, and a more than a 20% share of women watching primetime pay-TV in the US by owning five of the top pay-TV networks for women.

What’s more, Discovery hopes that the new deal will accelerate its growth across linear, digital and short-form platforms, bringing together Scripps’ “established expertise in short-form video creation” with Discovery’s investment in Group Nine Media to create a “new scale player”. The company said it will generate a combined 7 billion short-form video streams monthly.

Kenneth W. Lowe, chairman, president & chief executive of Scripps Networks Interactive is expected to join Discovery’s board of directors following the close of the transaction.

Speaking on the acquisition, Lowe said: “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.”

David Zaslav, president and chief executive of Discovery Communications, said the deal represents a "new chapter" for Discovery to 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".

The transaction is subject to approval by Discovery and Scripps’ shareholders, regulatory approvals, and other customary closing conditions.

The deal comes as the company reported its second quarter revenues. Total revenues increased 2% to $1,745m compared to the prior year, as 2% growth at U.S. Networks and 3% growth at International Networks were partially offset by a 4% decline at education and other.

U.S. Networks’ revenues for the second quarter increased 2% to $890m, driven by 4% distribution growth and relatively flat advertising growth. Distribution revenue growth was primarily driven by higher rates partially offset by a decline in subscribers.

International Networks’ revenues for the second quarter increased 3% to $811m. Excluding currency effects, total revenues increased 4%. International ad revenues increased 1% (excluding the impact of currency effects), partially offset by lower ratings in Asia-Pacific and the Nordics. International distribution revenues, excluding the impact of currency effects, grew 7%, mostly due to higher affiliate rates in Europe following further investment in sports content and higher affiliate rates in Latin America.

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