Discovery Communications, Scripps End Deal Talks (Report)

1:04 AM PST 01/13/2014 by Georg Szalai
Discovery Communications CEO David Zaslav

The cable networks operators had held early-stage discussions about a possible combination, but the family that controls Scripps didn't appear willing to sell.

Discovery Communications and Scripps Networks Interactive have ended early-stage deal talks that could have led to a combination of the two operators of cable channels, The Wall Street Journal reported on Monday.

The discussions had been in exploratory stages, and Discovery, led by CEO David Zaslav, never made a formal bid for the smaller company or discussed a possible price tag, according to the Journal.

It also quoted sources as saying that the family that controls Scripps didn't appear ready to sell the firm now. Discovery had also approached Scripps several years ago.

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However, last year, amid the end of a family trust that controlled a 43 percent stake and a majority of voting stock of Scripps, renewed chatter emerged about a possible deal. The stock held by the trust was distributed to family members, but they still vote on deal decisions as a unit.

"Each organization was coming from a different place," the Journal quoted a source as saying. "Timing is everything in life … and now is not the right time."

Discovery and Scripps representatives couldn't immediately be reached for comment.

The Scripps business includes such lifestyle networks as HGTV, Travel Channel, Cooking Channel and a majority stake in Food Network. Discovery's portfolio includes Discovery Channel, TLC, Animal Planet and OWN: The Oprah Winfrey Network, among others.

Many on Wall Street had remained cautious about the outlook for a deal at this stage.

"Given the negotiating leverage of broadcast networks and sports rights owners, we do think long-term consolidation of sub-scale content owners like Scripps Networks, Discovery Communications and AMC Networks makes sense," said MoffettNathanson analyst Michael Nathanson. Others also said that Discovery's international strength could benefit Scripps networks.

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But ISI Media analyst Vijay Jayant wrote late last year: "We really only see Scripps' Travel Channel as a logical fit, internationally, for Discovery (which used to be a part-owner of Travel). A couple of Scripps' other genres are starting to grow outside the U.S., but they require more country-by-country customization, in our opinion, which is a lower-margin business model than that enjoyed by Discovery. Granted, both companies' sets of content could be considered 'edu-tainment,' and the right price and structure could make or break a deal."

A banker had told THR: "The suggestion that Scripps will be acquired seems to come up every year. The idea makes sense for the right buyer, but that doesn't mean it will necessarily happen now."

Discovery has otherwise focused its dealmaking on Europe. The firm has said it is in talks to boost its stake in the Eurosport network of France's TF1 Group after it acquired a 20 percent stake in late 2012.

Email: Georg.Szalai@THR.com
Twitter: @georgszalai

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