Discovery Moves Toward Going Public

Discovery Communications agreed to buy Cox Communications' 25 percent stake in Discovery, a move that analysts say could be a precursor to the company going public.

If completed, the transaction would mean two-thirds of Discovery would be owned by John Malone's Discovery Holding, which is publicly traded on Nasdaq. Malone would have to buy out Advance/Newhouse Communications, which owns about a third of the company, to gain complete control.

Discovery, which produces channels including TLC, Animal Planet and Discovery Health, purchased the stake in exchange for Travel Channel, Antenna Audio and $1.28 billion in cash. Discovery is a private company, owned primarily by Discovery Holding, Cox Communications and Advance/Newhouse Communications. Discovery's founder, John S. Hendricks, owns about 1 percent.

"This is one step that moves them closer to being a publicly traded company," said Andy Baker, an analyst with Cathay Financial. Discovery Holding "gets a larger stake in Discovery Communications and only has one more party to contend with before the holding company structure can be turned into one operating company."

Although Advance/Newhouse could hold out, Malone "now has control of the situation," said Harold Vogel, a media analyst with Vogel Capital Management. "It's one less board to worry about, one less group that he'll have to consult with."

Discovery Holding is a spinoff of Liberty Media, of which Malone is chairman. Liberty's programming assets include the cable movie network Starz and QVC, as well as stakes in GSN, the game-show network, and Discovery.

Discovery Communications officials would not comment on the possibility of the company going public but said this transaction, the largest in Discovery's history, would lead to a clearer ownership structure.

"This proposed transaction will further streamline our operations and give the company more strategic flexibility," David Zaslav, chief executive of Discovery Communications, said in a statement. "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."

Zaslav has been leading a fast-paced change at the Silver Spring company. He took his post in November, then last month reshuffled the executive structure at Discovery Communications by eliminating the position held by superstar producer Billy Campbell, removing and shifting other executives, and having most major departments report directly to him. It was announced that five executives would leave.

Yesterday's move further clarified where major media are headed, Vogel said. "All large media companies . . . are maneuvering to simplify," he said. "The wave of consolidation and conglomerates that happened over the past 25 to 30 years is no longer in effect. There is a move toward -- finally -- more transparency and simplification."

Completion of the transaction is subject to various conditions, including regulatory clearances and approvals. Discovery Communications said it expects the transaction to close by mid-May.

Discovery Holding shares rose by $1.12, or 6.1 percent, to close at $19.43.

Staff writer Frank Ahrens contributed to this report.