Discovery Quits Scripps Takeover Plan

Zacks Equity Research

According to reports by the Wall Street Journal, Discovery Communications Inc. (NASD:DISCA) has abandoned its plan to acquire Scripps Networks Interactive Inc. (NYSE:SNI). In Nov 2013, VARIETY reported that Discovery is considering a bid to acquire Scripps Networks.

However, the discussion between the companies did not cross the preliminary stage as the family that controls Scripps Networks showed reluctance to the selloff. The Scripps family owns a 43% stake in the company.

Nevertheless, we believe that a merger between Discovery Communications and Scripps Networks would significantly benefit both entities. Discovery Communications has a diversified content network. Its flagship Discovery channel is known as a nature channel. Similarly, Animal Planet is a wildlife channel.

The company has a military channel, an ownership interest in Oprah Winfrey Network and has recently acquired the SBS Nordic operations of Prosiebensat.1 Media AG. Moreover, Discovery Communications is a geographically diversified company operating in more than 200 countries with over 100 TV networks.

On the other hand, Scripps Networks is a pure-play lifestyle TV network consisting of six channels. All these cable channels have loyal audiences, who also view the company’s content in several non-TV platforms. This helps Scripps Networks to explore the non-TV verticals, such as magazines (print media) and websites (Internet). The company also acquired Asian Food Channel, a leading food-focused pay-TV network in Asia.

Additionally, both the companies are gradually depending on the video streaming or the TVEverywhere platform. Scripps Networks has a content licensing deal with (NASD:AMZN) through which its popular TV channels are available on Amazon’s subscription-based video streaming service – Prime Instant Video.

Discovery Communications recently renewed its agreement with Time Warner Cable Inc. (NYSE:TWC) to offer its content on the TVEverywhere platform of the latter. Currently, Scripps Networks has a Zacks Rank #3 (Hold) while Discovery carries a Zacks Rank #4 (Sell).

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