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Viacom Out of Chase for Scripps Networks

Viacom Inc. is no longer in the bidding for Scripps Networks Interactive, according to people familiar with the situation, leaving the owner of cable’s Food Network and HGTV to negotiate exclusively with Discovery Communications, the other media company pursuing a tie-up.

Viacom and Discovery declined to make executives available for comment. A Scripps spokesman said the company declined to comment. Even with Discovery and Scripps in close talks, a sale is not guaranteed, these people cautioned.

Viacom, the owner of MTV, Comedy Central, and Nickelodeon, had reportedly made an all-cash bid for Scripps, a move aimed at luring the Knoxville, Tenn., company’s sizable family ownership. But that raised a flag on Wall Street. “Essentially this means Viacom would very likely get downgraded to junk status from its current BBB- rating, something the company has been trying to avoid for the past few years,” noted Michael Nathanson, a media-industry analyst, in a recent research note. Viacom has been working to turn itself around as its networks suffer ratings declines and viewers migrate to new viewing venues.

A Scripps purchase would also give Discovery more leverage in negotiating with traditional distributors, like Comcast, Charter Communications and Cox. And it could aid Discovery as the media industry places new emphasis on how programming is distributed in the future, with more consumers turning to streaming video , mobile devices and on-demand consumption. Adding the Scripps networks would give Discovery more heft if they were to launch a so-called “skinny bundle” of programming to audiences.

While Discovery networks like TLC and Investigation Discovery are no stranger to reality programming, the company’s main focus has been on shows centered on science, nature, and exploration. Its focus on non-fiction programming is seen as a good fit with Scripps, whose networks focus on food, travel, and home-improvement.

Scripps’ value could be worth as much as $10.6 billion. Wells Fargo analyst Marci Ryvicker estimates the controlling Scripps family would likely require at least $91 per share, and might even hold out for as much as $95, for a sale. A final decision in the matter is expected to come as soon as next week.

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