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2017-07-27 15:45:02
Discovery Said to Be in Final Stages of Talks to Acquire Scripps

The race for the owner of Food Network and HGTV, Scripps Networks Interactive, has come down to one finalist.

Discovery Communications is in advanced discussions to buy Scripps now that Viacom is out of the competition, people briefed on the matter said Thursday.

Should a deal be completed, it could come at a dear price. Scripps’s market value as of Thursday stood at more than $11 billion. Discovery is closing in on a bid of around $90 per share, according to one of the people, or about 34 percent higher than where Scripps’s stock was trading before reports about a potential sale emerged.

Discovery’s bid is about 70 percent cash and 30 percent stock, the person said.

An announcement could come as soon as next week, some of these people said, cautioning that talks could still fall apart. News of Viacom’s exit from negotiations with Scripps was reported earlier by Reuters.

A spokesman for Scripps declined to comment on Thursday.

The competition over Scripps has taken place amid a sweeping wave of consolidation in the telecom and media industries. Cable and broadband providers, including Comcast, Charter, Verizon and AT&T, have opened their checkbooks to grow.

That has put pressure on companies whose content flows through those distribution pipes to gain scale to better negotiate with those providers on issues like retransmission fees. Over the past several years, deals like Starz’s sale to Lionsgate Entertainment have emerged as part of that effort.

Discovery, which is backed by the billionaire John C. Malone and the Newhouse family, has been an active deal maker since the collapse of its last round of talks with Scripps three years ago. The broadcaster has expanded its international presence, with deals to buy Eurosport and other foreign programming rights.

Scripps, until 2008 a part of its eponymous family’s once-sprawling media empire, would provide multiple benefits. The company is host to popular lifestyle brands like Food Network, Travel Channel and HGTV.

Deal makers in the media industry have long identified Scripps as a potential target.

The key to winning over Scripps has been crafting a proposal acceptable to the family, which still controls about 92 percent of the company’s voting stock, and which votes as a bloc. The family has met a number of times to discuss the prospects of a sale, most recently on Tuesday, a person with knowledge of that meeting said.

Both Discovery and Viacom had looked at combining Scripps’s top brands with their own — Investigation Discovery, OWN and TLC for Discovery; MTV, Nickelodeon and Comedy Central for Viacom — to create an entertainment-centered “skinny bundle.” Such a package would give pay-TV subscribers a cheaper option to a standard bundle that includes a bigger variety of channels at a higher price.

In particular for Viacom, a Scripps deal would have been a major step by Viacom’s chief executive, Robert M. Bakish, to revive his company’s fortunes. Mr. Bakish, who took over Viacom’s management last fall, has laid out a five-point plan that includes bolstering its top brands.

But a deal for Scripps — and particularly an all-cash bid, as Mr. Bakish and his team had been considering — would have stretched Viacom’s financial resources. The company reported having just $671 million in cash and equivalents as of March 31, while it carried some $12.2 billion in long-term debt on its books.

Some analysts estimated that Viacom’s credit rating would tumble to junk status if it pursued an all-cash bid.

In the end, Viacom may have decided that it could not risk overpaying, according to some of the people briefed on the matter.