Liberty to Spin Off Stake in Discovery, Reports Earnings

Mar 15, 2005  •  Post A Comment

Liberty Media on Tuesday said it is spinning off its 50 percent stake in Discovery Communications into a publicly traded company, continuing the company’s efforts to simplify its corporate structure.

The move, which will combine the Discovery stake with Liberty’s 100 percent ownership of media services company Ascent Media to create a new company called Discovery Holdings, was met with some surprise on Wall Street.

While analysts had expected Liberty to further simplify its corporate structure, Discovery has been a huge contributor to the company’s bottom line.

“This will be a pure-play public company,” said Liberty CEO Robert Bennett. “This will improve the company’s ability to grow the business and drive further consolidation.”

What is unclear is what Discovery’s other shareholders will do. In addition to Liberty, other shareholders include Cox Communications and Advance/Newhouse, each of which owns 24.5 percent. Discovery founder John Hendricks holds the remaining 1 percent.

Liberty officials said that while they hope Cox and Advance/Newhouse might contribute their stakes into the new company, a decision not to will not prevent the spinoff from taking place.

As part of the deal, Liberty shareholders of series A and series B common stock will receive 0.05 of a share of Discovery Holdings stock for each share of Liberty stock tendered.

Separately, Liberty also reported a widened fourth-quarter loss of $2million, compared with year-earlier red ink of $931 million. Revenue advanced to $2.35 billion from slightly more than $2 billion a year earlier. For the full year, Liberty swung to a profit of $46 million, versus a year-earlier loss of $1.2 billion, while revenue surged to $7.7 billion from $3.7 billion a year ago.