Media company Scripps Networks Interactive, Inc.’s (NASDAQ:$SNI) stock skyrocketed on July 19 after reports of a possible merger with Discovery Communications Inc. (NASDAQ:$DISCA) surfaced. Scripp’s stock closed on Wednesday, July 19, at $76.89 after seeing a 14.73% rise. Meanwhile, Discovery’s stock closed at $27.18 after a 4.34% increase.
According to Reuters, Scripps and Discovery had attempted to form a partnership three years ago, but the plan fell apart. As such, the fact that the two media companies are in talks again is pretty huge.
Scripps’ ownership of major channels like HGTV, Travel Channel, and the majority of the Food Network would fit in well with Discovery’s popular channels like Animal Planet and TLC. While no details have been provided for the deal yet, the sudden surge in Scripps’ stock signals just how badly investors want the deal to pull through. This is especially true when one considers the fact that video-streaming sites like Netflix (NASDAQ:$NFLX) and internet TV are causing cable viewership to fall. For a small company like Scripps, a merger with a bigger, more established media company would definitely help in a time like this. Discovery’s market cap is $16 billion, while Scripps’ market cap is around $10 billion after today’s rise.
However, given the fact that Scripps and Discovery had merger talks in the past but failed to reach a deal, investors should keep a close eye on current talks. Still, with Scripps trying to form a merger again with Discovery three years after their failed talks as well as reported talks with Viacom (NASDAQ:$VIA), it’s pretty clear that Scripps is trying to gain a partnership and an acquisition deal. This suggests that the company itself knows that it might not survive the cable TV take-over lead by Netflix.
If both Viacom and Discovery are interested in purchasing and merging with Scripps, the companies could be involved in a bidding war. Investors should expect some unpredictability for the stocks in the near future when more news are released regarding the deals.
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