Discovery And Scripps Networks Shares Spike On Report Of Merger Talks

Shares in Discovery Communications and Scripps Networks Interactive are soaring in post-market trading following an alert from Dow Jones  — followed by a story in the Wall Street Journal — that says the companies are engaged in merger talks.

Discovery’s up 9.8% and Scripps is up 12.5%. There are no disclosures yet indicating how far the companies have gone in their conversations, or how a merger might be structured.

The Journal says that it’s “possible that another bidder for Scripps could emerge.”

Liberty Media’s John Malone is the dominant shareholder at Discovery, which has a market value of $9.9 billion. With preferred shares, the value rises to $15 billion. Its portfolio includes Discovery Channel, Investigation Discovery, TLC, Animal Planet, and the OWN partnership with Oprah Winfrey. It also owns Eurosport.

Scripps is valued at $8.8 billion, and includes HGTV, Food Network, Travel Channel, and Great American Country.

Last week Discovery CEO David Zaslav told reporters at Allen & Co’s annual Sun Valley soirre that he “feels pretty good about how we are right now in terms of size.” He added, though, that “there’s a lot of discussions” about potential deals at a time when cable and broadband companies are merging and need content “to differentiate and de-commoditize that pipe.”

A union of the non-fiction programmers “makes good sense,” RBC Capital Markets Steven Cahall said in May. Scripps has begun to expand abroad and Discovery “has become the leading international distribution platform” among major media companies with channels in more than 220 countries and territories.

A combination also would give the programmers more clout in negotiations with distributors including Comcast, AT&T, and Charter (where Malone also is the leading shareholder).

As independent programmers, Discovery and Scripps are seen as vulnerable to being left out as traditional and online distributors create so-called skinny bundles. They offer customers fewer channels than the expanded basic TV bundle, but at lower prices.

The companies engaged in merger talks in 2014, but Scripps ended them before they began discussions about price or terms.

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