Analyst Sees Good Fit Between Disney, Scripps

Analyst Jason Bazinet of Citi Research says he believes the Walt Disney Co. may acquire
Scripps Networks Interactive.

Scripps has been seen as a possible acquisition target before. Bazinet says Scripps would fill in a key part of Disney’s audience portfolio by bringing in rich, upscale older women that don’t watch ESPN, Disney Channel or ABC Family.

He also suggests that diversifying Disney’s cable portfolio away from sports would be prudent.

In addition, Scripps and Disney have worked well together in the past, and overall, the cable network business appears to be in rationalization phase, as indicated by the Comcast-NBCU merger and the consolidation of A+E under Disney and Hearst.

Bazinet figures that Scripps is worth $67 a share and says that at that price, if Disney uses stock to make the buy, it would be only modestly dilutive to earnings.

“Both firms are very well run. But both firm equity values appear fairly valued to us,” Bazinet said in his report. “And even if we’re right about a potential Disney-Scripps merger, it doesn’t alter or view on either stock materially given the limited upside for Scripps (or downside in Disney).

In afternoon trading, Scripps Networks stock was at $60.87 a share, up 93 cents or 1.55% Disney was at $49.86 a share, up 21 cents or 0.42%.