Analyst: Discovery and Fox Should Talk

Juenger Says Discovery/Fox Pairing Makes Sense
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Despite a firm denial from 21st Century Fox concerning a report claiming that the programming giant has held early talks with Discovery Communications about a possible takeover, Sanford Bernstein media analyst Todd Juenger wrote that a pairing of the two could make sense.

According to a report in the Australian Financial Review late Sunday, 21st Century Fox executives held a meeting with Discovery officials about two weeks ago to discuss a takeover that would create a $100 billion entertainment giant.

According to subsequent reports, a Fox spokesman said the AFR artiicle was “categorically untrue.” Discovery declined to comment, but sources familiar with the company agreed with the Fox statement.

While there may or may not be any talks in the works, Sanford Bernstein media analyst Todd Juenger said the two companies there should be.

“If the parties, as they maintain, are not talking, we think they ought to have a chat,” Juemger wrote. “We believe a merger between Fox and [Discovery] would make strategic sense on a number of levels.”

Juenger wrote that he discussed just such a pairing in an August report and conference call with clients discussing broader media M&A scenarios, which included the following:

If the Fox/Time Warner deal does not happen, we still love the idea of Discovery as Fox’s next best alternative, Juenger wrote. Putting these two big companies together would create the dominant global player in international cable networks. It would also create a natural combination of Nat Geo and Discovery, as well as the Sky Sports networks and Eurosport in Europe. Clearly, there are a lot of redundancies on the cost side, particularly internationally. Fox could also help Discovery with affiliate fees in the States. So, whichever way Time Warner/Fox goes, we think there’s an interesting combination for Discovery.

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