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M&A, executive shakeups drive media stocks with mixed results

Media and communications stocks showed mixed results during the week ended Dec. 8, as broad markets slumped and then rebounded and some companies made headlines on merger agreements and other developments.

Regal Entertainment Group and British theater owner Cineworld Group plc surprised some early in the week when Cineworld said it planned to purchase the larger U.S. chain in a $5.9 billion transaction, or $23 per share. While Regal had earlier acknowledged Cineworld's interest, some analysts described the deal as a head-scratcher, noting that the price for Regal is more than Cineworld's enterprise value. The U.K. company plans to issue $4 billion in debt facilities to help pay for the transaction.

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In response, S&P Global ratings on Dec. 6 put Regal on CreditWatch with negative implications, suggesting the deal would thrust the combined company's leverage above its downgrade threshold. Still, Regal's stock jumped up 10.9% for the five trading days ended Dec. 8.

Other theater names also moved during the week, with IMAX Corp. dropping 3.2% and theatrical advertising name National CineMedia Inc. adding 5.3%.

The exhibitor space was not the only sector rocked by merger news. TV networks sprung upward as speculation about a potential deal between Walt Disney Co. and 21st Century Fox Inc. intensified.

The Wall Street Journal reported that Disney wants Fox's movie and TV studio and some U.S. cable networks and some international holdings. Comcast Corp. and Verizon Communications Inc. also are said to be interested, though the latest reports suggested that negotiations with Disney were heating up.

Fox shares gained 3.5% for the trading week, and several other TV network owners also saw shares climb, as news outlets like Deadline Hollywood suggested a deal with Disney could signal a broader wave of consolidation in the TV space. For example, AMC Networks Inc. was up 1.3% and Viacom Inc. climbed 3.1% for the week. For its part, Disney shares fell 1.0%.

Satellite cable operator DISH Network Corp. vied for some time in the headlines as well.

The company's executive and co-founder Charlie Ergen stepped down from his position as CEO, with COO Erik Carlson to take his place.

Given that Ergen will retain the role of chairman of the board, Roe Equity Research cable and telecom analyst Kevin Roe argued that the shift is not a "dramatic change" for the company. "Charlie Ergen has always been in charge and is still in charge, regardless of title," the analyst said.

Nevertheless, shareholders sold out of DISH shares for a decline of 3.5% over the five trading days ended Dec. 8.

Beleaguered social media name Snap Inc. also was back in the headlines, facing increased competition from its peers, but investors still saw reasons for bullishness.

The company has struggled with its valuation since going public March, with the stock trading persistently below its $17 IPO price. On Nov. 30, Alphabet Inc.'s YouTube unveiled new social features similar to the Snapchat platform, and on Dec. 7, The Verge reported that Facebook Inc.'s Instagram is testing a Snapchat-like version of its private messaging app. However, investors were undaunted, and Snap shares ended the week up 8.7%, but still below its IPO price at $15.07 per share.

Other big movers for the week included mobile telco Sprint Corp. and broadcast company Sinclair Broadcast Group Inc. Sprint traded down 8.9% for the week, and Sinclair gained 5.2%.