Discovery Communications Takes a Bigger Stake in Cable

The big news on Wall Street Monday morning is a pair of market-moving merger and acquisition headlines. Discovery Communications Inc. (NASDAQ: DISCA) announced a buyout of Scripps Networks Interactive, Inc. (SNI) for $14.6 billion.

But while Scripps has a new partner, Sprint Corp. (S) investors have once again been left out in the cold after potential partner Charter Communications (CHTR) said it has “no interest” in merging with Sprint.

Discovery Communications will be acquiring Scripps’ portfolio of TV networks, including HGTV, Travel Channel and Food Network as it looks to boost its content offerings to stay competitive in a traditional TV environment that most analysts see in secular decline. Discovery’s top networks include Animal Planet and Discovery Channel.

Following the deal, Discovery’s networks now account for 20 percent of total cable viewership, a market share that could give the company meaningful leverage when negotiating deals with distributors or potentially launching its own “skinny” TV bundle.

Discovery reportedly outbid rival Viacom (VIAB) to complete the Scripps deal.

While the 70 percent cash and 30 percent stock deal looks to be a positive for Discovery, the company is still facing an uphill battle.

“If there were no secular concern, this deal would be a slam dunk,” FBR Capital Markets analyst Barton Crockett said of the potential merger last week. “Investors don’t trust that this [model] can continue, and we’re not sure what turns that fear around.”

While Scripps and Discovery face an uncertain future together, telecom giant Sprint has once again gotten shunned in its search for a partner. Japan’s SoftBank, which holds a controlling stake in Sprint, had proposed a complex merger with Charter, but a Charter spokesperson rejected the deal in an email on Sunday.

“We understand why a deal is attractive for SoftBank, but Charter has no interest in acquiring Sprint,” the spokesperson says.

Rival T-Mobile US Inc (TMUS) has long been Sprint’s top choice for a partner, but T-Mobileappears to be in no hurry to complete a deal.

“I think the No. 1 favorite, the quickest route to synergy, is the option that we pursued from the start, T-Mobile,” SoftBank CEO Masayoshi Son said earlier this year.

For now, T-Mobile is…

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