Broadcast radio and TV staff at The E.W. Scripps Co. need not worry about a new owner. That’s because Scripps Networks Interactive, the former cable TV division of Scripps spun off as its own company in July 2008, is the entity that Discovery Communications is acquiring in a multi-billion-dollar stock and cash transaction.
In an announcement that came right before a poor Q2 earnings report from Discovery, President/CEO David Zaslav confirmed that its inked a $90 per-share deal for SNI, valued at $14.6 billion (based on the July 21 closing price of Discovery shares).
The purchase price represents a premium of 34% to Scripps’ unaffected share price as of July 18; with Discovery shares down some 7.3% in the final 15 minutes of trading Monday (7/31), SNI looks to be in a favorable position.
The transaction is expected to close by early 2018, the companies note.
“This is an exciting new chapter for Discovery,” Zaslav says. “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.”
Kenneth W. Lowe, Chairman and President/CEO of Scripps Networks Interactive, adds, “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 combined company will produce approximately 8,000 hours of original programming annually, and when combined Discovery will enjoy close to a 20% share of ad-supported pay-TV audiences in the U.S.
Additionally, the combined company will be home to five of the top pay-TV networks for women and account for more than a 20% share of women watching prime-time pay-TV in the U.S., the companies assert.
Discovery’s networks are comprised of Discovery Channel, TLC, Investigation Discovery, Animal Planet, Science and Turbo/Velocity, OWN (in the U.S.), Discovery Kids in Latin America, and Eurosport, the dominant sports entertainment and news channel serving Europe and the U.K.
Scripps’ networks are HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country. It also owns Poland’s TVN entertainment, lifestyle and news channel; Asian Food Channel; Fine Living Network; and UKTV, an independent commercial joint venture with BBC Worldwide.
Discovery was drawn to the Scripps networks because of its female-friendly brands.
“Discovery sees strong opportunities to strengthen its existing global female networks with select content from Food Network, HGTV and all the Scripps brands,” it notes.
The purchase price factors in the assumption of Scripps’ $2.7 billion in net debt. Post-closing, Scripps’ shareholders will own approximately 20% of Discovery’s fully diluted common shares, and Discovery’s shareholders will own approximately 80%. This calculation is based on the number of Discovery shares outstanding today.
The cash portion of the purchase price will be financed with a combination of new debt and cash on hand. Discovery has secured fully committed financing from affiliates of Goldman Sachs & Co. to fund the acquisition.
Discovery expects to maintain investment grade ratings throughout this transaction. And, as part of its commitment to de-lever its balance sheet, Discovery intends to suspend its share repurchase program until such time as its credit metrics are in line with its rating.
Guggenheim Securities, LLC and Goldman Sachs & Co. LLC served as financial advisors and Debevoise & Plimpton LLP served as legal advisor to Discovery.
Allen & Company LLC and J.P. Morgan Securities LLC served as financial advisors and Weil Gotshal & Manges LLP served as legal advisor to Scripps.