Discovery Communications took a big step toward becoming a public company by acquiring the 25 percent stake owned by Cox Communications.
The deal increases the portion of Discovery Communications that is owned by Discovery Holding Co., which was set up by cable magnate John Malone in 2005. With the buyout of Cox’s stake, Discovery Holdings increases its ownership from 50 percent to 66.6 percent. Advance/Newhouse Communications increases its ownership from 25 percent to 33.3 percent.
Discovery paid $1.275 million in cash for the stake. Cox also got the assets of the Travel Channel, Travelchannel.com and Antenna Audio.
Should Advance/Newhouse put its stake into Discovery Holdings, the market would have a clean shot at putting a value on Discovery Communications, which owns cable networks including the Discovery Channel, TLC and Animal Planet.
Last year, analyst William Drewry of Credit Suisse complained in a report that Discovery’s holding company structure and a lack of disclosure have made the company a less-than-compelling investment. “A more normal operating structure and appropriate transparency could positively impact on share-price performance, but the probability of this occurring remains very difficult to assess.”
With Cox looking to raise cash to reduce debt, the sale of its stake moved Discovery nearer to a neater ownership structure.
“This proposed transaction will simplify Discovery’s ownership structure, further streamline our operations and give the company more strategic flexibility,” said David Zaslav, Discovery Communications president and CEO. “With the structural changes we are putting in place, Discovery is creating a more efficient decision-making process and building a strong, aggressive organization poised for continued growth.”
Mr. Zaslav, who joined the company from NBC Universal in January, has already restructured the company’s management, removing several senior executives and increasing the responsibilities of the heads of five network brand groups.