On Monday, July 31, Discovery Communications Inc. (NASDAQ:$DISCA) announced that it will be acquiring Scripps Networks Interactive Inc. (NASDAQ:$SNI) for $11.9 billion. This acquisition will help to increase the company’s negotiating leverage as pay TV operators continue to lose subscribers and it seeks new audience demographics.
The Discovery Communications & Scripps Networks acquisition was completed Sunday night and announced Monday morning. The deal will combine Scripp’s female audience of lifestyle shows such as Travel Channel and Food Network with Discovery’s Animal Planet and Discovery Channel, which mostly have male viewers.
Regardless of a forecasted $350 million in total cost synergies, there are a few analysts who question how the integrated company plans to compete long term as we are seeing more and more viewers cut cords to cable providers. Additionally, advertising and ratings are declining.
Discovery will be paying 70% cash and 30% stock for Scripps. Including debt, the total price of the acquisition is $14.6 billion.
Many believe the combined company’s larger programming slate might give it an advantage in terms of negotiations for inclusion in skinny bundles, or for economy-priced cable packages. According to the company, after the merger, they will offer up 300,000 hours of content and capture about 20% share of ad-supported cable audiences in the U.S.
Keep in mind that this acquisition still requires regulatory and shareholder approval. Discovery has tried and failed twice before to purchase Scripps. However, last week, Discovery outbid Viacom Inc (NASDAQ:$VIAB) for Scripps Networks.
After the news, Discovery stock dropped 8.6% to $24.50, while Scripps Networks increased 0.5% to $87.31.
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