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Discovery (DISCA) Closes $14.6B Buyout of Scripps Networks

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Discovery Communications, Inc.DISCA has finally completed the much-awaited acquisition of Scripps Networks Interactive, Inc. The combined entity of both companies under the name, Discovery, Inc., will likely offer a complementary and dynamic suite of brands and emerge a new global leader in the space.

The acquisition was initially announced in July 2017. The company received an approval for the same from the U.S. Department of Justice only last week. The cash-and-stock based transaction was valued at $14.6 billion including Scripps' approximate net debt of $2.7 billion.

Per the merger agreement, Scripps' shareholders are entitled to receive around $90 per share inclusive of $65.82 per share in cash and $1.06 in Series C common shares of Discovery stock.

In fact, Shares of Discovery have been on an uptrend since the past few months with the company nearing closure of the integration. The stock has rallied 24.2% in the last three months, marginally outperforming the industry 's 23.9% gain.

The buyout is likely to boost the stock further.

Benefits of the Merger

The consolidated unit is likely to produce around 8,000 hours of original programming content on a yearly basis, reaching fans across 220 countries and territories in 50 different languages. Additionally, it is expected to generate 7 billion short-form video streams per month, expanding its presence across new video and social media platforms.

The two entities will have nearly 20% of ad-supported pay-TV audiences' share in the United States. Further, the joint body plans to strengthen its global network of female subscribers. It will feature five of the top pay-TV networks for women, accounting for more than 20% female viewership of primetime pay-TV within the country.

The acquisition widens Discovery's international footprint, providing the audience with a varied range of Scripps' brands, programming feed and talent. Scripps' strong position in core international markets like the United Kingdom and Poland will aid Discovery's existing content pipeline in the areas including Discovery's Home and Health network across Latin America.

Moreover, the transaction is expected to be accretive to the combined entity's adjusted earnings per share and free cash flow in the first year after its conclusion, besides generating cost synergies of approximately $350 million.

The conglomerate will include brands namely Discovery Channel, Food Network, HGTV, Investigation Discovery, TLC, Eurosport, Oprah Winfrey Network (OWN) as well as a stake in Group Nine Media.

Notably, in December 2017, Discovery had announced to purchase a majority interest in OWN. Last November, the company along with others provided funding to Group Nine Media to become a stakeholder.

This Zacks Rank #3 (Hold) company has long maintained a dominant status among broadcasters by dishing out audiences with unscripted shows involving nature, mankind and animals. However, leading players like Netflix, Inc. NFLX , Amazon.com, Inc. AMZN and Apple Inc. AAPL spend heavily to produce an array of high-quality scripted shows. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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