Disney's Next Blockbuster Could Be an Acquisition
NEW YORK (TheStreet) -- After beating third quarter earnings expectations thanks to the box-office record setting Avengers movie and growing profit margins at its theme parks, Disney's(DIS) next blockbuster may be a near-$10 billion acquisition.
Scripps Networks Interactive(SNI) could be on Disney's radar, according to Citigroup analysts. By adding Scripps and its popular cable channels Food Network, HGTV, Travel and DIY, Disney would be able to target the same adult women watching its ABC shows Desperate Housewives and Dancing' with the Stars, but with higher margins, said the Citi analysts led by Jason Bazinet, in a report.
It wouldn't be the first time Disney paid up for access to new content and demographic markets.
The company successfully used acquisitions including a $4 billion deal for comics giant Marvel in 2009 -- its partner on Avengers -- and a $7.4 billion deal for animated movie studio Pixar in 2006, to revamp its motion pictures unit, bringing in new demographics like teenage and adult males, and breathing life into theme park and merchandising efforts globally.
Those deals, in addition to a blockbuster acquisition of ABC in the 1990s, transformed the company into one of the fastest growing and highly valued media companies in the U.S. Now, with Rupert Murdoch's News Corp.(NWSA) announcing its intention to split and previous spinoffs at Viacom and Time Warner, Disney is the the last media tycoon after a generation of industry consolidation.
Bazinet wrote in an August 13 note to clients that Disney's gap in earnings from upscale females -- in contrast to the billions it earns from sports-obsessed males through ESPN -- makes Scripps a likely target.
A Scripps deal would grow the cable unit by 50% while diversifying it away from sports, where carriage costs are rising quickly, and its past successes in M&A. Meanwhile, Bazinet expects that after Comcast's(CMCSA) acquisition of a majority stake in NBCUniversal from General Electric (GE) in 2009, consolidation is imminent among cable networks.