Discovery To Become Stand-Alone Stock

by David Goetzl, Dec 17, 2007, 8:30 AM

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Giving investors a further option in a pure-play cable content company, Discovery Communications will become a stand-alone publicly traded stock next year as part of an agreement between its two principal shareholders.

The move comes via a deal between Discovery Holding Company (formerly part of John Malone's Liberty Media) and an arm of Advance/Newhouse--where they will merge their stakes to form the new listed company. It's expected to close some time mid-next year.

Discovery Holding Company, which owns some two-thirds of Discovery Communications along with other ventures, is currently on the NASDAQ. As part of the transaction, it will spin off its other operations.

Advance/Newhouse, whose parent has interests in publishing and cable MSO operations in addition to the 33% stake in Discovery, is privately held.

The move has been widely speculated, and Discovery Holding has for some time been reporting results for Discovery Communications that covered all 100% of its operations, despite its only two-thirds ownership. The reporting has provided a snapshot into the performance ups and downs of Discovery's U.S. fleet of networks, although it has been difficult to get an exact gauge on ad revenue figures as affiliate performance results have been melded in.

As far back as a year ago--when David Zaslav took over as Discovery CEO from NBC Universal--he mentioned that he relished his experience at NBCU, but looked forward to an opportunity to run his own ship and report to a board. That was yet another signal that Discovery was on a track to become a fully public operation.

"As a fully public company, Discovery will be in a stronger position to grow organically and through acquisition," Zaslav said Thursday. "The new structure will enhance our ability to produce and distribute the high-quality programming that has been our hallmark since the company was founded two decades ago."

Zaslav has been clear in his year on the job that he intends for Discovery--similar to Viacom--to focus on content production and monetization through advertising and subscription fees, with an increasing emphasis overseas. He has shed non-core businesses, made some acquisitions, and rebranded networks as initial steps.

John Malone, chairman of Liberty Media and head of Discovery Holding, said the "transaction will unlock the full potential and value of Discovery, and provide a broader range of options to pursue their aggressive growth strategy in the future."

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