Malone Buys Majority Share of Discovery
Malone, through his Discovery Holding Co., has finally inked a deal to buy the 25% interest Cox Communications has in Discovery Communications Inc. for $1.275 billion in cash. He will also acquire The Travel Channel and Antenna Audio, a U.K.-based museum-audio-tour business.
For the cable king, that ups his controlling interest in DCI from 50% to 66%. Advance/Newhouse Communications will now have a 33% stake, leaving Discovery founder John Hendricks with a 1% stake.
For years, corporate decisions at Discovery were slowed because of the four major partners' input. Now, new DCI CEO David Zaslav believes the streamlined process will help Discovery make quicker decisions.
In short, the deal gives Malone more control, but not ultimate control. Major business decisions still require the consent of 80% of Discovery shareholders. Which means getting Advance/Newhouse to sign off on many decisions. It's believed that Malone will continue efforts to pursue Advance/Newhouse's stake, according to analysts.
"I would assume [Discovery] is now going to pay more attention to him," said Dennis McAlpine, managing director for New York-based investment banker McAlpine Associates.
Through the years, Malone has run into problems with some of Discovery's decisions, such as the company's efforts to start a chain of retail stores, said McAlpine. Malone was against the move, and subsequently the company abandoned that business.
In December, Malone secured a 39% controlling interest in DirecTV, through an $11 billion stock swap and cash deal with News Corp. "They are taking bigger pieces of companies," says McAlpine, regarding Malone, Liberty Media, and his associated companies. "They have switched from passive to active investors."
DCI owns more than 100 domestic and international cable channels, including Discovery Channel, Animal Planet and TLC.