SILVER SPRING, Md. and
KNOXVILLE, Tenn., July 31, 2017 /PRNewswire/ -- Discovery
Communications, Inc. (Nasdaq: DISCA, DISCB, DISCK) ("Discovery")
and Scripps Networks Interactive, Inc. (Nasdaq: SNI) ("Scripps")
today announced that they have signed a
definitive agreement for Discovery
to acquire Scripps in a cash-and-stock transaction
valued at $14.6 billion, or $90 per share, based on
Discovery's Friday, July 21 closing
price. The purchase price represents a premium of 34% to
Scripps' unaffected share price as of Tuesday, July 18, 2017. The transaction is
expected to close by early 2018.
"This is an exciting new chapter for Discovery. Scripps is
one of the best run media companies in the world with terrific
assets, strong brands and popular talent and formats. Our
business is about great storytelling, authentic characters and
passionate super fans. We believe that by coming together with
Scripps, we will create a stronger, more flexible and more
dynamic media company with a global content engine that can be
fully optimized and monetized across our combined networks,
products and services in every country around the world," said
David Zaslav, President and CEO,
Discovery Communications.
"Through the passion and dedication of our incredible employees,
and with the support of the Scripps family, we have built a
lifestyle content company that touches the lives of consumers every
single day," said Kenneth W. Lowe,
Chairman, President & CEO, Scripps Networks Interactive. "This
agreement with Discovery presents an unmatched opportunity for
Scripps to grow its leading lifestyle brands across the world and
on new and emerging channels including short-form,
direct-to-consumer and streaming platforms."
New Innovator Across a Broad Portfolio of Entertainment
Assets
Together, Discovery and Scripps will offer a complementary and
dynamic suite of brands. The combined company will produce
approximately 8,000 hours of original programming annually, be home
to approximately 300,000 hours of library content, and will
generate a combined 7 billion short-form video streams monthly,
demonstrating its commitment to delivering content as a top
short-form provider.
Combined, Discovery and Scripps will have nearly 20% share of
ad-supported pay-TV audiences in the U.S. Additionally, the
combined company will be home to five of the top pay-TV networks
for women and will account for over 20% share of women watching
primetime pay-TV in the U.S.
The Combined Portfolio's Brands Will Include:
Discovery: Discovery Channel, TLC, Investigation Discovery,
Animal Planet, Science and Turbo/Velocity, as well as OWN in the
U.S., Discovery Kids in Latin
America, and Eurosport, the leading provider of locally
relevant, premium sports and Home of the Olympic Games across
Europe.
Scripps: HGTV, Food Network, Travel Channel, DIY Network,
Cooking Channel and Great American Country, as well as TVN, a
premiere multi-platform provider of entertainment, lifestyle and
news content in Poland; UKTV,
an independent commercial joint venture with BBC Worldwide;
Asian Food Channel, the first pan- regional TV food network in
Asia; and lifestyle channel Fine
Living Network.
International Growth Opportunities
The combination will extend Scripps' brands, programming and
talent to a broader international audience through Discovery's
best-in-class global distribution, sales and languaging
infrastructure. Discovery sees strong opportunities to
strengthen its existing global female networks with select content
from Food Network, HGTV and all the Scripps brands. Scripps also
has a strong position in key international growth markets,
including the U.K. and Poland, and
will help fuel Discovery's existing content pipeline in growth
areas like Discovery's Home and Health network in Latin America.
Social, Mobile and Non-linear Growth
Opportunities
The combined company will deliver 7 billion monthly short-form
streams, bringing together Scripps' established expertise in
short-form video creation with Discovery's investment in Group Nine
Media to create a new scale player with a strong ability to compete
for audiences and ad dollars. The combination will give Discovery
an outstanding presence on new video and social media platforms.
Additionally, Scripps Lifestyle Studios will become a key component
of Discovery's content engine, making the company a leader in key
strategic areas such as data-driven ad sales, endemic advertising,
and branded entertainment solutions.
Discovery's added scale, content engine and multiple brand
offerings will present a compelling opportunity for new digital
distribution partners, including mobile, OTT, and
direct-to-consumer platforms and offerings.
Synergies
The combination is expected to create significant cost
synergies, estimated at approximately $350 million. The deal is expected to be
accretive to Adjusted Earnings per Share and to Free Cash Flow in
the first year after close.
Transaction Details
Scripps shareholders will receive $90 per share under the terms of the agreement,
comprised of $63.00 per share in cash
and $27.00 per share in Class C
Common shares of Discovery stock, based on Discovery's Friday, July 21 closing price. The stock portion
will be subject to a collar based on the volume weighted average
price of Discovery Class C Common Shares over the 15 trading days
ending on the third trading day prior to closing (the "Average
Discovery Price"). Scripps shareholders will receive 1.2096
Discovery Class C Common shares if the Average Discovery Price is
below $22.32, and 0.9408 Discovery
Class C Common shares if the Average Discovery Price is above
$28.70. If the Average
Discovery Price is greater than or equal to $22.32 but less than or equal to $28.70, Scripps shareholders will receive a
number of shares between 1.2096 and 0.9408 equal to $27.00 in value. If the Average Discovery Price
is between $22.32 and $25.51,
Discovery has the option to pay additional cash instead of issuing
more shares.
Scripps shareholders will have the option to elect to receive
their consideration in cash, stock or the mixture described above,
subject to pro rata cut backs to the extent cash or stock is
oversubscribed.
This purchase price implies a total transaction value of
$14.6 billion, including the
assumption of Scripps' net debt of approximately $2.7 billion. Post-closing, Scripps' shareholders
will own approximately 20% of Discovery's fully diluted common
shares and Discovery's shareholders will own approximately 80%.
This calculation is based on the number of Discovery shares
outstanding today.
The cash portion of the purchase price will be financed with a
combination of new debt and cash on hand. Discovery has secured
fully committed financing from affiliates of Goldman
Sachs & Co. LLC to fund the acquisition. Discovery
expects to maintain investment grade ratings throughout this
transaction. As part of its commitment to de-lever its balance
sheet, Discovery intends to suspend its share repurchase program
until such time as its credit metrics are in line with its rating.
Specifically, Discovery expects to be below 3.5x gross debt to
AOIBDA within the first two years after the transaction closes,
using substantially all free cash flow to reduce pre-payable and/or
short term debt.
Mr. Lowe is expected to join Discovery's board of directors
following the close of the transaction.
The transaction is subject to approval by Discovery and Scripps'
shareholders, regulatory approvals, and other customary closing
conditions.
John C. Malone, Advance/Newhouse
Programming Partnership ("ANPP") and members of the Scripps family
have entered into voting agreements to vote in favor of the
transaction and take certain other actions, in each case subject to
the terms and conditions of their respective agreements.
In addition, ANPP has provided its consent, in its capacity as
the holder of Discovery's outstanding shares of Series A preferred
stock, for Discovery to enter into the merger agreement and
consummate the merger. In connection with this consent, Discovery
and ANPP have entered into an exchange agreement pursuant to which
ANPP will exchange all of its shares of Series A and Series C
preferred stock of Discovery for shares of newly designated Series
A-1 and Series C-1 preferred stock of Discovery. The exchange
transaction will not change the aggregate number of shares of
Discovery's Series A common stock and Series C common stock that
are beneficially owned by ANPP. The terms of the exchange agreement
were negotiated, considered and approved by an independent
committee of disinterested directors of Discovery, which committee
was advised by independent financial advisors and legal
counsel.
Guggenheim Securities, LLC and Goldman Sachs & Co. LLC
served as financial advisors and Debevoise & Plimpton LLP
served as legal advisor to Discovery. Allen & Company LLC and
J.P. Morgan Securities LLC served as financial advisors and Weil
Gotshal & Manges LLP served as legal advisor to Scripps.
Evercore Group L.L.C. served as financial advisor and Kirkland
& Ellis served as legal advisor to the Scripps family. UBS
Investment Bank served as financial advisor and Sullivan &
Cromwell LLP served as legal advisor to Advance/Newhouse.
Teleconference and Webcast
Discovery and Scripps will host a conference call
on Monday, July, 31 at 8:00 a.m. Eastern
Time (ET) to discuss this announcement as well as Discovery's
second quarter 2017 earnings results.
To access the conference call in the U.S.
dial 1-844-452-2811, or outside of the U.S.
dial 1-574-990-9832, and use the following passcode: DISCA.
Please dial in approximately 10 minutes in advance to ensure you
are connected prior to the beginning of the call.
A live audio webcast of the call also will be
available on Discovery Communications' website
at www.discoverycommunications.com.
A replay of the call will be available starting
approximately one hour after the completion of the call. The
replay can be accessed by phone in the U.S.
at 1-855-859-2056 and outside of the U.S.
at 1-404-537-3406 using the following passcode: 27013063.
A replay of the audio webcast also will be available in the
"Investor Relations" section of the company's website.
About Discovery Communications:
Discovery
Communications (Nasdaq: DISCA, DISCB, DISCK) satisfies curiosity
and captivates superfans around the globe with a portfolio of
premium nonfiction, lifestyle, sports and kids content brands
including Discovery Channel, TLC, Investigation Discovery, Animal
Planet, Science and Turbo/Velocity, as well as OWN: Oprah Winfrey
Network in the U.S., Discovery Kids in Latin America, and Eurosport, the leading
provider of locally relevant, premium sports and Home of the
Olympic Games across Europe.
Available in more than 220 countries and territories, Discovery's
programming reaches 3 billion cumulative viewers, who together
consume 54 billion hours of Discovery content each year.
Discovery's offering extends beyond traditional TV to all screens,
including TV Everywhere products such as the GO portfolio and
Discovery Kids Play; over-the-top streaming services such as
Eurosport Player; digital-first and social video from Group Nine
Media; and virtual reality storytelling through Discovery VR. For
more information, please
visit www.discoverycommunications.com.
About Scripps Networks Interactive:
Scripps Networks
Interactive, Inc. (Nasdaq: SNI) is one of the leading
developers of engaging lifestyle content in the home, food and
travel categories for television, the Internet and emerging
platforms. The company's lifestyle media portfolio includes leading
TV and entertainment brands HGTV, Food Network, Travel
Channel, DIY Network, Cooking Channel and Great American
Country. Its digital division, Scripps Lifestyle Studios,
creates compelling content for online, social and mobile
platforms. International operations include TVN,
Poland's premier multi-platform
media company; UKTV, an independent commercial joint venture
with BBC Worldwide; Asian Food Channel, the first pan-regional
TV food network in Asia; and lifestyle channel Fine
Living Network. The company's global networks and websites reach
millions of consumers across North and South
America, Asia-Pacific, Europe, the Middle
East and Africa. Scripps Networks
Interactive is headquartered in Knoxville, Tenn. For
more information, please
visit http://www.scrippsnetworksinteractive.com.
Cautionary Language Concerning Forward-Looking
Statements
Information set forth in this communication,
including financial estimates and statements as to the expected
timing, completion and effects of the proposed merger between
Discovery Communications, Inc. and Scripps Networks Interactive,
Inc., constitute forward-looking statements within the meaning of
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These estimates and statements are
subject to risks and uncertainties, and actual results might differ
materially. Such estimates and statements include, but are
not limited to, statements about the benefits of the merger,
including future financial and operating results, the combined
company's plans, objectives, expectations and intentions, and other
statements that are not historical facts. Such statements are
based upon the current beliefs and expectations of the management
of Discovery Communications, Inc. and Scripps Networks Interactive,
Inc. and are subject to significant risks and uncertainties outside
of our control. Among the risks and uncertainties that could
cause actual results to differ from those described in the
forward-looking statements are the following: (1) the
occurrence of any event, change or other circumstances that could
give rise to the termination of the merger agreement, (2) the
risk that Scripps Networks Interactive, Inc. stockholders may not
adopt the merger agreement or that Discovery Communications, Inc.
stockholders may not approve the stock issuance, (3) the risk
that the necessary regulatory approvals may not be obtained or may
be obtained subject to conditions that are not anticipated, and
(4) risks that any of the closing conditions to the proposed
merger may not be satisfied in a timely manner. Discussions
of additional risks and uncertainties are contained in Discovery
Communications, Inc.'s and Scripps Networks Interactive Inc.'s
filings with the Securities and Exchange Commission. Neither
Discovery Communications, Inc. nor Scripps Networks Interactive
Inc. is under any obligation, and each expressly disclaims any
obligation, to update, alter, or otherwise revise any
forward-looking statements, whether written or oral, that may be
made from time to time, whether as a result of new information,
future events, or otherwise. Persons reading this announcement are
cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof.
Where to Find Additional Information:
This
communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. This communication may be deemed to be
solicitation material in respect of the proposed merger between
Discovery Communications and Scripps Networks Interactive. In
connection with the proposed merger, Discovery Communications
intends to file a registration statement on Form S-4, containing a
proxy statement/prospectus with the SEC. INVESTORS AND SECURITY
HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT/PROSPECTUS WHEN IT
BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders may obtain a free copy of the proxy
statement/prospectus (when available) and other documents filed by
Discovery Communications and Scripps Networks Interactive with the
SEC at http://www.sec.gov. Free copies of the proxy
statement/prospectus, once available, and each company's other
filings with the SEC may also be obtained from the respective
companies. Free copies of documents filed with the SEC by Discovery
Communications will be made available free of charge on Discovery
Communications' investor relations website
at corporate.discovery.com/investors. Free copies of documents
filed with the SEC by Scripps Networks Interactive will be made
available free of charge on Scripps Networks Interactive's investor
relations website
at www.ir.scrippsnetworksinteractive.com.
Participants in the Solicitation:
Discovery
Communications and its directors and executive officers, and
Scripps Networks Interactive and its directors and executive
officers, may be deemed to be participants in the solicitation of
proxies from the holders of Discovery Communications and Scripps
Networks Interactive common stock in respect of the proposed
merger. Information about the directors and executive officers of
Discovery Communications is set forth in its Annual Report on Form
10-K, which was filed with the SEC on February 14, 2017 and in its Annual Proxy
Statement, which was filed with the SEC on April 5, 2017. Information about the directors
and executive officers of Scripps Networks Interactive is set forth
in its Annual Report on Form 10-K, which was filed with the SEC on
February 24, 2017 and in its Annual
Proxy Statement, which was filed with the SEC on March 29, 2017. Investors may obtain additional
information regarding the interest of such participants by reading
the proxy statement/prospectus regarding the proposed merger when
it becomes available.
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SOURCE Discovery Communications