By Frank Ahrens
Washington Post Staff Writer
Friday, December 14, 2007

Discovery Communications Inc. said yesterday that it will go public, giving the cable television company access to more money but placing its performance under Wall Street scrutiny for the first time.

Becoming a publicly traded company will allow Discovery to expand on its current offerings of popular shows such as "MythBusters" and "Deadliest Catch" by buying up compatible companies and spending more on new programming.

The company expects its stock to begin trading in the second quarter of next year. Notable details, such as the size of the board of directors and its composition, the ticker symbol and initial offering price, have yet to be determined.

Discovery Communications is headquartered in Silver Spring, having moved from Bethesda in 2003. It has 100 networks in 173 nations and claims a global audience of 1.5 billion.

The company's ownership structure has been complicated and opaque. John S. Hendricks launched the Discovery Channel in 1985. His initial investors included cable baron John Malone, Cox Communications cable company and Newhouse Broadcasting, now Advance/Newhouse.

Malone's stake in Discovery Communications eventually grew to 49 percent. In 2005, Malone created a publicly traded company, Discovery Holding Co., that held his portion of Discovery Communications. Discovery Holding also owns Ascent Media Group, which sells technical services to filmmakers and television producers.

The spinoff was widely seen as a crucial step in taking Discovery public.

Discovery Communications began simplifying its ownership structure in the spring when it bought out Cox's stake. When Discovery goes public, Advance/Newhouse will receive preferred shares in the new company and the right to elect two seats on the new board. Advance/Newhouse owns a cable system and Conde Nast, which publishes the New Yorker and other magazines.

Another sign of Discovery's move toward public trading came in January, when it hired David Zaslav from NBC Universal as chief executive.

Zaslav has reorganized and cut staff, shutting all 103 of the company's stores and laying off 25 percent of the workforce, cutting costs and making the cable network more attractive to potential investors. He also rebranded Discovery Home as Planet Green and acquired TreeHugger.com as a complementary Web site.

"We are one step closer to being a public company, which will give us more agility and strength in our drive to be bigger and more efficient and stronger," Zaslav said in an interview yesterday.

For instance, as a private company, Discovery had to pay cash for its $250 million purchase of Web site HowStuffWorks in October. As a publicly traded company, it would be significantly easier for Discovery to get loans for acquisitions and use its free cash flow for other purposes, such as investing in new programming.

At the same time, Discovery will have to change its culture to that of a publicly traded firm, which means managing the company quarter to quarter in addition to long-term. It also means that Discovery's financial reports must be more detailed and transparent.

Shares of Discovery Holding closed yesterday at $26.69, down 73 cents, on the Nasdaq Stock Market.

Analysts estimated that shares of Discovery Communications would trade in the $30 range.

Zaslav said he is committed to continuing Discovery's educational and informational programming -- "We don't have any wet T-shirts; we don't have any girls behaving badly," he said -- and that he does not anticipate Wall Street's relentless emphasis on performance to force Discovery shows to go low-brow to get higher ratings.

Hendricks, Discovery's founder, was traveling yesterday and unavailable for interview.

"I believe that the company is now ideally poised to take advantage of the opportunities that may emerge from the new Discovery corporate structure announced today and I look forward to continuing to work alongside my great longtime partners as Discovery begins this next exciting chapter of our advancement in the global marketplace," Hendricks said in a statement.

"Today's 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," Malone said in the statement.