Discovery Goes Public, Begins Trading Thursday

After lengthy negotiations, Discovery Communications is expected to become a stand-alone public company on Thursday and begin trading on the NASDAQ. The opening price will be determined when the market closes this evening.

A holding company led by John Malone gave the green light Tuesday for Discovery to become fully public for the first time in its almost 25-year history. The company operates 13 domestic channels and more than a hundred globally.

Last week, Pali Research analyst Richard Greenfield pegged the new company's target price at $33 after 52 weeks, although that was before the market meltdown. When trading starts Thursday morning, the share price is likely to be in the $20 range.

While Discovery will now be fully public, investors have been able to own a piece of it through the Malone-led Discovery Holding Company. The holding company has been traded on the NASDAQ since October 2005.

Through a complex transaction, its closing price tonight will determine where trading starts for the new Discovery Communications on Thursday morning. Yesterday, that price was $19.38.



For Discovery Communications to go public, Discovery Holding Company is combining its two-thirds interest in the company with the 33% owned by privately held Advance/Newhouse.

The deal comes after about a year and a half of negotiations between the parties. The agreement gives Advance/Newhouse preferred stock and the right to appoint three of the 11 board members.

For their part, shareholders in the Malone-led Discovery Holding company approved the deal Tuesday morning.

In an e-mail last night, Discovery announced that a range of on-air personalities from its networks will be ringing the opening bell at the NASDAQ Thursday, including from Discovery Channel's "Deadliest Catch," TLC's "What Not To Wear" and Emeril Lagasse from Planet Green. The new Discovery Communications will be led by current CEO David Zaslav. For the first time, investors will get some commentary on the company's performance as management holds quarterly earnings calls. That will begin with Zaslav some time after Oct. 1.

Pali Research's Greenfield cited that communication as a benefit of the public transaction. Greenfield also wrote that the move gives Discovery--which owns the Discovery Channel, TLC, Animal Planet and the coming Oprah Winfrey Network--some muscle to make acquisitions. But at the same time, it increases the possibility that it may be acquired itself--writing that the transaction "widens the universe of potential buyers."

Discovery Holding Company did not hold earnings calls, but has been reporting the results for Discovery as if it owned 100%. In the recent second quarter, revenue for wholly owned domestic networks was $549 million, up 11% from the year before. Ad dollars rose 9%.

Investors tend to be bullish on cable channels--with their dual distribution/advertising revenue streams and well-known brands.

However, Discovery Holding's shares have dropped recently. The $19.38 closing price Tuesday was up 4% on news of the impending public transaction. That was down from a 52-week high of $29.81. Most media companies have had a difficult time in recent months.

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