EC clears Discovery Scripps acquisition

Discovery Communications has confirmed that the European Commission (EC) has cleared Discovery’s proposed $14.6 billion (€12.4bn) acquisition of Scripps Networks Interactive, subject to conditions.

This regulatory milestone is an important step towards closing the transaction. The EC’s approval is conditional on Discovery’s commitment to offer third party distributors the right, on a non-exclusive and unbundled basis, to distribute TVN24 and/or TVN24 BiS in Poland.

“We are pleased with the positive decision of the European Commission,” said David Zaslav, President and Chief Executive Officer, Discovery. “We believe that joining the Discovery and Scripps Networks’ family of brands and assets will allow us to better serve our passionate fans with more content on more platforms worldwide, while at the same time optimising our business for greater efficiency.”

Discovery announced in July 2017 that it had reached a definitive agreement to acquire Scripps Networks in a cash-and-stock transaction. The combination of the companies is expected to extend Scripps Networks’ content to international audiences, increase opportunities for advertisers and digital distribution partners, and unlock significant cost synergies.

The closing of the proposed transaction is subject to obtaining additional antitrust clearances and satisfying other customary closing conditions. The transaction is expected to close later in Q1 2018.

Until legal close, the companies will continue to operate as separate and independent entities.

The Commission’s investigation found that:

  • In the UK, the proposed transaction would raise no competition issues given the limited overlap between the companies’ activities.
  • In Poland, the proposed transaction risked increasing Discovery’s bargaining power vis-à-vis TV distributors because of the acquisition of certain channels that are particularly important in distributors’ basic pay-TV channel packages. In particular, TVN24, TVN’s flagship news channel, was identified as crucial to retail TV offerings. Following the transaction, Discovery would have had the ability and incentive to impose the licensing of its whole TV channel portfolio. This would have allowed it to increase its licensing fees to the detriment of Polish consumers and competition.

To address the Commission’s competition concerns, Discovery committed to making TVN24 and its sister channel TVN24 Bis available to current and future TV distributors in Poland for a reasonable fee determined by reference to comparable agreements. This commitment will remain in place for a period of seven years.

The Commission concluded that the proposed transaction, as modified by the commitments, would raise no competition concerns. The Commission’s decision is conditional upon full compliance with the commitments.

In parallel, the Commission also rejected a request from Poland to refer the merger to the Polish competition authority for assessment under Polish competition law. The Commission concluded that, given its extensive experience in assessing cases in the media sector, and the need to ensure consistency in the application of merger control rules in this sector across the EEA, it was better placed to deal with this case. The Commission also considered that, to the extent that the transaction raises competition concerns, they are fully addressed by the commitments.

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