Potential Scripps Networks, Discovery Merger Could Be Coming At Just The Right Time, Analyst Says

Shares of Scripps Networks Interactive Inc. were up 14% during intraday trade on Wednesday, after a Wall Street Journal report Tuesday night that the media company was in talks to merge with Discovery Communications Inc. . Shares of Discovery were up nearly 4%. The potential tie-up not only makes sense, but could be coming at just the right time, according to MKM Partners analyst Eric Handler. A Scripps acquisition would give Discovery increased relevance and scale, and would be beneficial to Scripps shareholders, Handler wrote in a note to investors. "The possible acquisition of Scripps should prove beneficial for Discovery, and create a company with revenue of roughly $10.5 billion and EBITDA of more than $4 billion," Handler wrote. "The timing of this potential transaction could be coming at a good time for Scripps, which is seeing erosion in its ratings trends, especially with HGTV, while investment spending for new initiatives remains elevated." Shares of Discovery are down nearly 2% in the year to date, while Scripps shares have gained more than 16% in the year and the S&P 500 index has gained more than 10%.