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Discovery aims for content clout with Scripps Network bid

NEW YORK (Reuters) – Discovery Communications Inc is acquiring Scripps Networks Interactive Inc for $11.9 billion in a deal expected to boost the company’s negotiating leverage as it seeks new audiences.

The acquisition, announced on Monday, brings together Scripps’ largely female-focused lifestyle channels such as HGTV, Travel Channel and Food Network with Discovery’s Animal Planet and Discovery Channel, whose viewers are primarily male.

Despite expectations of $350 million in total cost synergies, many analysts questioned how the combined company would compete long term as viewers cut cords to cable providers and as advertising and ratings decline.

Discovery shares ended regular trading down 8.2 percent at $24.60 while those of Scripps finished up 0.6 percent at $87.41.

Discovery is paying 70 percent cash and 30 percent stock for Scripps. The total price of the deal is $14.6 billion including debt.

“While we believe the two companies are likely better positioned together, rather than apart, the longer-term issues facing the industry still remain,” wrote John Janedis, an analyst at Jefferies, in a note on Monday.

Both Discovery and Scripps reported quarterly earnings on Monday that reflected the challenges facing U.S. media companies. Scripps missed its second quarter ad guidance and lowered its full-year estimates, and Discovery reported flat advertising and lower affiliate revenue.

U.S. television networks and cable providers are under pressure as more viewers watch shows and movies on phones and tablets. There is also increased competition for viewers from streaming services such as Netflix Inc and Amazon.com Inc.

Five of the largest U.S. pay TV providers posted subscriber losses during the second quarter.

The combined company’s larger programming slate might give it an advantage in negotiations for inclusion in skinny bundles, or economy-priced cable packages that offer fewer channels than a standard contract.

After the merger, the company will offer 300,000 hours of content and capture about a 20 percent share of ad-supported cable audiences in the United States, Discovery said on an analyst call Monday morning.

“The transaction supports and accelerates Discovery’s pivot from a linear TV-only company to a leading content provider across all screens and services around the world,” David Zaslav, Discovery’s chief executive, told investors.

The combined company would also have more muscle in negotiations with cable and other distributors when contracts come up for renewal, executives said.

By adding Scripps programming, Discovery could also launch its own “skinny bundle” of networks at a low cost, executives said.

The combined company would be home to five of the top cable networks for women with more than a 20 percent share of women prime-time viewers in the United States, according to Discovery.

Discovery will evaluate the Scripps channels, as it has its own, to figure out if any could be web-based, Zaslav said on the call.

Scripps has been considered a takeover target since the Scripps family trust, which controlled the company, was dissolved five years ago.

Under the terms of the deal, Scripps CEO Ken Lowe would join the board of the combined company.

The deal requires regulatory and shareholder approvals. Major shareholders including cable magnate John Malone, Advance/Newhouse Programming Partnership and members of the Scripps family, support the deal, the companies said.

Discovery had tried unsuccessfully twice before to buy Scripps. Discovery outbid Viacom Inc for Scripps, Reuters reported first last week.

Guggenheim Securities and Goldman Sachs served as financial advisers to Discovery. Allen Co LLC and J.P. Morgan Securities served as financial advisers to Scripps.

Evercore Group served as financial adviser to the Scripps family.

Editing by Jeffrey Benkoe and Steve Orlofsky

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HBO says data hacked, media says ‘Game of Thrones’ targeted

NEW YORK (Reuters) – U.S. cable channel HBO said on Monday that hackers had stolen upcoming programming, and Entertainment Weekly reported that the theft included a script for an unaired episode of the hit fantasy show “Game of Thrones.”

HBO, a unit of Time-Warner Inc (TWX.N), declined to comment on the specific programming stolen in the hack.

“As most of you have probably heard by now, there has been a cyber incident directed at the company which has resulted in some stolen proprietary information, including some of our programming,” HBO Chairman Richard Plepler wrote in a message to employees, which the company shared with reporters.

The company declined to comment on reports that unbroadcast episodes and scripts were among the data hacked, citing an “ongoing investigation” by unspecified law enforcement officials.

Entertainment Weekly reported that hackers stole 1.5 terabytes of data and had already posted online unbroadcast episodes of “Ballers” and “Room 104,” along with “a script or treatment” for next week’s episode of “Game of Thrones.”

Reuters also received an e-mail on Sunday from a person claiming to have stolen HBO data, including “Game of Thrones.”

The show is now in its seventh season and due to wrap up next year.

Reporting by Jonathan Allen and Piya Sinha-Roy; Editing by Cynthia Osterman

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Lawsuit says Wells Fargo auto insurance charges were a fraud

(Reuters) – A new lawsuit accuses Wells Fargo Co of racketeering violations and fraud after the bank admitted to charging several hundred thousand borrowers for auto insurance they did not ask for or need, causing many delinquencies.

The proposed class action filed on Sunday in San Francisco federal court deepens the fallout from the latest bad practice uncovered at Wells Fargo.

It follows the scandal in which the third-largest U.S. bank has said employees created as many as 2.1 million unauthorized customer accounts to meet sales goals.

Wells Fargo said late last week it would refund about $80 million to an estimated 570,000 customers who were wrongly charged for auto insurance from 2012 to 2017, including roughly 20,000 whose vehicles were repossessed.

The San Francisco-based bank made its announcement less than three hours after The New York Times wrote about an internal report prepared for executives that detailed improper charges.

Wells Fargo said it halted the charges last September after customers expressed “concerns.”

But according to the lawsuit, refunds to defrauded customers are not enough.

“Wells Fargo has long lost the right to decide what is best for its customers,” Roland Tellis, a lawyer for the plaintiffs, said in an interview.

“Refunds don’t address the fraud or inflated premiums, the delinquency charges, and the late fees,” he added. “It will be up to a jury or court to decide the appropriate remedy.”

Wells Fargo spokeswoman Catherine Pulley declined to comment on the lawsuit, but in an email added: “We are very sorry for the inconvenience this caused impacted customers and we are in the process of notifying them and making things right.”

The lawsuit is led by Paul Hancock, a 34-year-old marketing consultant from Indianapolis.

He said Wells Fargo charged him $598 for insurance though he repeatedly told the bank he had coverage from Allstate, and imposed a late fee after the unnecessary policy took effect.

The lawsuit seeks unspecified damages, which could be tripled under federal racketeering law, for borrowers nationwide, and in California and Indiana.

“If refunding premiums was just the start, this could be a nine-figure case,” Tellis said.

Wells Fargo’s accounts scandal resulted in $185 million of regulatory penalties and a $142 million settlement of private litigation, and cost former Chief Executive John Stumpf his job.

The case is Hancock v Wells Fargo Co et al, U.S. District Court, Northern District of California, No. 17-04324.

Reporting by Jonathan Stempel in New York; Editing by Bernard Orr and Tom Brown

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Tesla drops after Musk warns of ‘manufacturing hell’

SAN FRANCISCO (Reuters) – Shares of Tesla dropped 3.5 percent on Monday after Chief Executive Elon Musk warned that the electric carmaker would face “manufacturing hell” as it ramps up production of its new mass-market Model 3 sedan.

At a launch event on Friday, Musk said customers had made over half a million advance reservations for the Model 3 as he handed over the first 30 cars to employee buyers, setting the stage for a major test of Tesla’s strategy to become a profitable electric car maker.

Tesla is counting on the Model 3 to help turn the cash-losing company into a profitable one and transform it from a niche player to a heavyweight in the automobile industry.

Investors already skeptical of Tesla’s aggressive growth targets focused on a warning by Musk that early production would be challenging.

“We’re going to go through at least six months of manufacturing hell,” Musk told journalists ahead of the event. He later made similar comments on stage.

Investors may get an idea of how “manufacturing hell” will affect Tesla’s rate of cash burn when the company posts its quarterly results on Wednesday. The Palo Alto, California company has spent over $2 billion in cash so far this year ahead of the launch.

Also on Monday, a group of workers at the Fremont, California factory where the Model 3 is made sent an open letter to the independent members Tesla’s board. The employees, who are trying to start a union, requested access to company safety plans and information on compensation.

Tesla’s stock has gained 53 percent in 2017, although it is down from a record high in June.

The $35,000 Model 3 is designed for easy production, with output targeted to reach 20,000 per month by December. Tesla’s last launch was the luxury Model X SUV in 2015 which had several production problems and a price tag starting around $80,000.

Tesla has promised to boost total car production to 500,000 vehicles next year, close to six times its 2016 output, a target that many auto industry experts believe is unrealistic. It sold 76,230 cars last year.

At the event, Musk said the price of a Model 3 with all of available options could reach $59,000. That level could scare off potential Tesla customers, wrote Barclays analyst Brian Johnson in a note to clients.

Tesla’s stock was down $11.85 at $323.21 at mid-afternoon.

Reporting by Noel Randewich; Editing by Richard Chang

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Wall Street on course to close its strongest month since Feb

(Reuters) – All three major U.S. indexes were set for their best monthly gains since February, with the Dow touching yet another record high.

The tech-heavy Nasdaq was, however, trading lower on Monday afternoon weighed down by Apple (AAPL.O), Facebook (FB.O), Google parent Alphabet (GOOGL.O) and Amazon (AMZN.O).

“We’ve been in a little bit of pull-back on some of the tech stocks for the last few days. I think it’s just a matter of the fact that they have had a very strong run,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

“The bull market is sort of broadening out and people are taking a few profits off the table on some these stocks that have done exceedingly well.”

Shares of Boeing were up 1.04 percent, making it the top boost to the Dow, after J.P. Morgan analysts raised price target.

Investors have been counting on earnings to support the relatively high valuations for equities, with the SP 500 trading at about 18 times earnings estimates for the next 12 months, above its long-term average of 15 times.

Of the 289 SP 500 companies that reported results until Friday, 73 percent of them beat analyst expectations. This is above the 71 percent average over the past four quarters, according to Thomson Reuters I/B/E/S.

Apple Inc (AAPL.O), a part of the Dow, is expected to report quarterly results after market close on Tuesday and its performance may hold the sway over tech stocks this week.

At 12:25 a.m. ET (1625 GMT) the Dow Jones Industrial Average .DJI was up 83.04 points, or 0.38 percent, at 21,913.35, the SP 500 .SPX was up 1.02 points, or 0.04 percent, at 2,473.12 and the Nasdaq Composite .IXIC was down 19.44 points, or 0.31 percent, at 6,355.23.

Seven of the 11 major SP sectors were higher, with the financial index’s .SPSY 0.68 percent rise leading the gainers.

On data front, contracts to buy previously owned homes rebounded in June after three straight monthly declines.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, jumped 1.5 percent to a reading of 110.2.

Oil prices rose on Monday, putting July was on track to become the strongest month for the commodity this year.

Snap shares (SNAP.N) trimmed much of its losses and were down 1.9 percent at $13.55 as a share lockup ended, allowing for sales by early investors.

Discovery Communications (DISCA.O) shares were down 7.5 percent at $24.77 after it said it would buy Scripps Networks Interactive (SNI.O) for $11.9 billion.

Charter Communications Inc shares (CHTR.O) were up 4.9 percent at $388.66 after the U.S. cable operator said on Sunday it was not interested in buying wireless carrier Sprint Corp (S.N).

Declining issues outnumbered advancers on the New York Stock Exchange by 1,471 to 1,331. On the Nasdaq, 1,668 issues fell and 1,090 advanced.

Reporting by Ankur Banerjee, Sweta Singh, and Sruthi Shankar in Bengaluru; Editing by Arun Koyyur

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/9PfNYvGfjTs/us-usa-stocks-idUSKBN1AG1BH

Discovery to buy Scripps Networks in bid for content clout

NEW YORK (Reuters) – Discovery Communications Inc is acquiring Scripps Networks Interactive Inc for $11.9 billion in a deal expected to boost the company’s negotiating leverage as pay TV operators lose subscribers and it seeks new audiences.

The acquisition, which was completed Sunday night and announced on Monday, brings together Scripps’ largely female audience of lifestyle channels such as HGTV, Travel Channel and Food Network with Discovery’s Animal Planet and Discovery Channel, which primarily has male viewers.

Despite expectations of $350 million in total cost synergies, many analysts questioned how the combined company would compete long term as viewers cut cords to cable providers and as advertising and ratings decline.

Discovery stock slid 8.6 percent to $24.50 while Scripps was up 0.5 percent to $87.31.

Discovery is paying 70 percent cash and 30 percent stock for Scripps. The total price of the deal is $14.6 billion including debt.

“While we believe the two companies are likely better positioned together, rather than apart, the longer-term issues facing the industry still remain,” wrote John Janedis, an analyst at Jefferies, in a note on Monday.

TV ratings and ad revenue are declining as young viewers opt to go online to watch shows and movies. Five of the largest U.S. pay TV providers posted subscriber losses during the second quarter.

The combined company’s larger programming slate might give it an advantage in negotiations for inclusion in skinny bundles, or economy-priced cable packages that offer fewer channels than a standard contract.

Post-merger, the company will offer 300,000 hours of content and capture about 20 percent share of ad-supported cable audiences in the United States, the company said on an analyst call Monday morning.

“The transaction supports and accelerates Discovery’s pivot from a linear TV-only company to a leading content provider across all screens and services around the world,” said David Zaslav, Discover’s chief executive officer, on the call.

The combined company would also have more muscle in negotiations with cable and other distributors when contracts come up for renewal, executives said.

By adding Scripps programming, Discovery could also launch its own “skinny bundle” of networks at a low cost, executives said.

U.S television networks and cable providers are under pressure as more viewers watch shows and movies on phones and tablets. There is also increased competition for viewers from streaming services such as Netflix Inc and Amazon.com Inc.

The combined company would be home to five of the top cable networks for women with over 20 percent share of women prime-time viewers in the United States, according to Discovery.

Scripps has been considered a takeover target since the Scripps family trust, which controlled the company, was dissolved five years ago.

Under the terms of the deal, Scripps CEO Ken Lowe would join the board of the combined company.

The deal requires regulatory and shareholder approvals. Major shareholders including cable magnate John Malone, Advance/Newhouse Programming Partnership and members of the Scripps family support the deal, according to the companies.

Discovery had tried unsuccessfully twice before to buy Scripps. Discovery outbid Viacom Inc for Scripps, Reuters reported first last week.

Guggenheim Securities and Goldman Sachs served as financial advisers to Discovery, while Debevoise Plimpton served as the legal adviser.

Allen Co LLC and J.P. Morgan Securities served as financial advisers to Scripps, while Weil, Gotshal Manges worked as the legal adviser.

Evercore Group and Kirkland Ellis respectively served as financial adviser and legal adviser to the Scripps family.

Editing by David Gregorio and Jeffrey Benkoe

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/gjezl23ChTg/us-scripps-net-int-m-a-discovery-commns-idUSKBN1AG173

Wal-Mart shuffles U.S. leadership teams in food, merchandising

CHICAGO (Reuters) – Wal-Mart Stores Inc (WMT.N) has announced changes to its food leadership team in an internal memo, as it prepares for increased competition with grocery rivals and remains caught in a price war.

Charles Redfield, executive vice-president for food at Wal-Mart U.S., unveiled the changes in the memo dated Friday and seen by Reuters. He said Wal-Mart is positioning leaders from the company in new roles so it can deliver and win at a time when retail is constantly changing.

A Wal-Mart spokesman did not immediately respond to a request for comment.

The changes come at a time when the world’s largest retailer has been conducting price tests across several U.S. states and pushing vendors to undercut rivals. The recent entry of German grocery chain Lidl and expansion by another German rival, Aldi [ALDIEI.UL], has raised the stakes for American grocery chain operators.

Some of Wal-Mart’s key changes include one for Shawn Baldwin, senior vice-president and general merchandise manager for produce and global food sourcing, who will focus on a new initiative for Hispanic customers. The memo did not elaborate on the initiative.

Martin Mundo, who has worked in Argentina and other countries for Wal-Mart, will replace Baldwin.

Earlier this month, Target Corp (TGT.N) Chief Executive Brian Cornell said at a conference that Hispanic consumers are shopping less often. Target has experienced this behavioral shift this year, especially in “border towns,” Cornell said at the conference, according to media reports.

Wal-Mart will also split leadership in its bakery and deli departments, the memo said. Kerry Robinson will be responsible for the bakery business but will no longer oversee the deli business. Tyler Lehr will be responsible for deli services.

Wal-Mart also announced leadership changes in its merchandising operations in a separate memo sent on Friday and seen by Reuters.

Deanah Baker will lead all of apparel, shoes and accessories. Scott McCall will oversee the entertainment, toys and seasonal product categories as a general merchandise manager and Jeff Evans will be general merchandise manager for products under the home category.

The company also named Greg Hall as senior vice-president of merchandise operation for food among several other moves in the merchandising team.

Wal-Mart shares were up 0.4 percent at $80.16 at midday on Monday.

Editing by Matthew Lewis

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/pkusj0ZcF3Q/us-walmart-moves-idUSKBN1AG23T

U.S. pending home sales rise; Midwest factory activity slows

WASHINGTON (Reuters) – Contracts to buy previously owned U.S. homes rebounded in June after three straight monthly declines, but the housing market remained constrained by a shortage of properties available for sale.

Other data on Monday showed that factory activity in the Midwest slowed this month after hitting a three-year high in June, with manufacturers reporting declining orders.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, jumped 1.5 percent, more than double economists’ expectations for a 0.7 percent increase. The rise, however, only partially unwound the prior three months’ declines.

Pending home contracts become sales after a month or two. The NAR reported last week that existing home sales, which generally have been running ahead of the signed contracts, fell 1.8 percent in June.

“In the very near term, the June increase in pending sales suggests that existing home sales will likely increase soon,” said Daniel Silver, an economist at JPMorgan in New York. “But the June increase for the index undid only a portion of the decline reported over the prior few months.”

Silver said he still expected the housing market recovery to continue over time despite recent weakness in some of the data, including homebuilder sentiment. The housing market has been stymied by a dearth of properties, which has pushed up prices and sidelined first-time homebuyers.

Housing contracted in the second quarter at its fastest pace in nearly seven years and was a drag on economic growth. Homebuilders have been unable to bridge the housing inventory gap, citing rising lumber costs and shortages of land and labor.

Regional Manufacturing Cooling

Pending home sales increased 0.5 percent from a year ago. In June, contracts rose 0.7 percent in the Northeast and advanced 2.1 percent in the South. They shot up 2.9 percent in the West but fell 0.5 percent Midwest.

The PHLX housing index .HGX fell slightly after the data and the U.S. dollar .DXY hit a session low against a basket of currencies. U.S. stocks were trading mixed and prices of U.S. Treasuries were lower.

In a separate report on Monday, the Institute for Supply Management Chicago said its MNI Chicago Business barometer fell to a three-month low of 58.9 in July from a reading of 65.7 in June. A reading above 50 indicates expansion in manufacturing in the Chicago area.

The report mirrored other regional manufacturing surveys that have shown softening in activity. Some of the moderation reflects the fading boost from the energy sector after a recent drop in crude oil prices. The Institute for Supply Management will publish its July survey of U.S. manufacturing on Tuesday.

“Regional manufacturing surveys suggest that activity in the factory sector remained solid in July, but growth moderated,” said John Ryding, chief economist at RDQ Economics in New York.

“We look for a similar message in tomorrow’s national ISM manufacturing survey.”The drop in sentiment in the ISM-Chicago survey was broad-based this month. The survey’s measure of new orders received by factories fell 11.6 points to a reading of 60.3, the lowest since February. The production index fell 6.9 points to 60.8.

A measure of order backlogs fell 4.9 points from June’s 23-year high to a reading of 57.9 in July. Suppliers took slightly less time to deliver key inputs. In response to a special question on wages, over 70 percent of manufacturers said they had increased their workers’ salaries over the past year.

A quarter of them said they had kept wages unchanged while 3 percent said they had cut their workers’ paychecks.

Reporting by Lucia Mutikani; Editing by Paul Simao

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/WKDSZyQy1Wg/us-usa-economy-housing-idUSKBN1AG1NE

Charter surges as Japan’s SoftBank considers bid

(Reuters) – Charter Communications Inc’s (CHTR.O) shares surged to a record high on Monday after a source said Japan’s SoftBank Group Corp (9984.T) was considering an acquisition offer, even as Charter has shot down the possibility of it being the acquirer in any merger with SoftBank’s U.S. wireless carrier, Sprint Corp (S.N).

A source familiar with the matter told Reuters on Sunday that SoftBank Chief Executive Masayoshi Son is considering making a bid for Charter, which has a market capitalization of $101 billion and another $60 billion in debt, as early as this week in what would be by far the Japanese telecommunications conglomerate’s biggest ever deal.

The prospect of a Sprint-Charter tie-up comes at a time when the telecom industry is preparing for a wave of deal activity. Regulators lifted a ban on merger discussions among telecom companies following the conclusion of an auction of broadcaster airwaves for wireless use in April.

Analysts and investors have said that tie-ups between cable companies and wireless carriers increasingly make sense as the distinction between broadband and wireless connectivity blurs, and consumers demand seamless connections for their devices.

Cable companies have the infrastructure that wireless carriers need for the growing amounts of mobile data customers are using. Meanwhile, cable companies could benefit from ownership of cellular networks as they launch their own mobile services. Charter is currently planning to launch its own wireless service on Verizon Communications Inc’s network (VZ.N) next year, and analysts have said that renting a network from a wireless carrier will be more costly long term than owning one.

Sprint, which is in the middle of a turnaround plan, has been looking to boost its financial status and better compete amid a fiercely competitive and saturated market for wireless service. The company has been exploring deal options with T-Mobile US Inc (TMUS.O) but faces the hurdle of reaching an agreement on price as well as getting the deal approved by regulators. Both companies have said they are open to other partners.

Charter’s shares pared gains to $389.24 in morning trading, up 5 percent, after hitting a record high of $399.95. Sprint shares were down 1.5 percent to $8.10.

A Charter spokesman declined to comment on Monday on whether the company would sell to the wireless carrier.

A deal between the two could be complex and disruptive, analysts said, noting financing issues, complicated ownerships and the possibility of upending existing partnerships.

JPMorgan analyst Philip Cusick wrote in a research note on that a base case scenario would assume a $500 a share bid for Charter, paid for with $20 billion of new cash from SoftBank and $40 billion of new debt. The deal could drive $2 billion in annual synergies, but he noted that SoftBank could lever Charter up significantly. A deal could also nullify part or all of Charter’s network resale agreement with Verizon.

It would also require the blessing of cable provider Comcast Corp (CMCSA.O). Comcast and Charter announced a wireless partnership in May aimed at finding cost savings as both companies enter the wireless market with their own mobile services. That agreement bars either company from tying up with a wireless carrier for a year without the other company’s consent.

Reporting by Anjali Athavaley in New York and Rishika Sadam in Bengaluru; Editing by Saumyadeb Chakrabarty and Nick Zieminski

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