Cramer: This M&A Frenzy Is all About Relevance and Fear

 | Jul 19, 2017 | 7:09 AM EDT
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Sometimes the gods of M&A make our jobs so easy. Out of pure chance, we get not one, but two deals that completely explain the landscape at the moment: The potential Discovery Communications (DISCA) and Scripps Networks Interactive (SNI) merger and the Renckitt Benckiser sale of French's, Frank's RedHot and Cattlemen's Barbecue Sauce to McCormick & Company (MKC) , the spice and condiments company.

While the former, at about $10 billion, is more than twice the size of the $4.2 billion food deal, they both represent a telling zeitgeist: Companies, afraid of losing their relevance and their clout, merging with others that have similar fears to produce stronger entities with more appeal to their masters -- their distributors and their ultimate customers.

In order to visualize the similarities consider the cable bundle and the supermarket as similar distribution methods. You stroll the aisles of the supermarket. You dial around cable.

There's a ghetto in the supermarket, a ghetto called the center of the store. There sits a slew of dying, no growth brands with some periodic disrupters that try to steal shelf space, even as it is not as important anymore, because you can buy most of what you get in the center aisle right off Amazon (AMZN) . It really doesn't matter, because it goes inside your pantry, and we know once it is in your pantry its lost among a host of other products that are just not top of mind.

Now consider your cable offerings. There's what you want and then there's all of this other stuff that might interest you but might not, a veritable center of the store, or pantry. You don't want to be stuck in that mosh pit of channels any more than you do the mosh pit of the pantry.

So along comes some willing acquirers who have no choice but to try to take more aisle/channel space and broaden distribution because, ultimately, their markets are challenged by new buyers who aren't interested in canned and bottled food or programming as much as their parents were.

Scripps -- with its HGTV, Food, Travel and DIY networks -- is canned, pantry food.

Reckitt Benckiser's French's Mustard, Frank's RedHot and Cattlemen's Barbecue Sauce are challenged channels, stuck in a wilderness of programming, threatened by upstarts like Sir Kensington's, just bought by the powerhouse that is Unilever (UL) , or by unfathomably loved and now ubiquitous Sriracha sauce.

Can these deals work? I don't think some of these companies have any choice but to try. McCormick been on a buying spree to get more spices under its hood. French's, to me, is the ultimate throwback mustard, its crayon-like yellow seems almost cartoonish in its unnatural nature. I have always thought it has enough preservatives in it to rival Velveeta as a condiment that can survive thermonuclear war and still taste good on Philly soft pretzels. Frank's? It has a positive reputation with millennials. I know the company thinks it is cool -- or else its Twitter handle wouldn't include "I put that S#!t on everything." I guess that's funny? Millennials like funny?

To me, millennials like adding stuff to food that has spice but doesn't make you fat -- so you can still look your selfie best -- and mustard and hot sauce have a lot fewer calories than, say, mayo or butter.

In a world of cord cutters, I can see many millennials simply not wanting to watch DIY or HGTV because they rent and don't own houses in record numbers. They do cook. Still, it's obvious that if the cable operators want to make money they need to squeeze these guys. Maybe together Scripps and Discovery stand, divided they fall.

In the new world where shelf space is hard to come by because of upstarts, the ghetto is to be avoided because of it's pantry preservative nature, and you are just going to order them from Amazon anyway, McCormick has to extend its reach somehow.

Same with Discovery-Scripps.

So don't consider these deals as growth makers. Consider them as defensive deals done to stay relevant. And, actually, to stay alive, in a world where every way that you used to get customers is now up in the air and, alas, no one really needs you or your brand because they seem to erode by the hour.

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