In Debut, Discovery Shares Mixed

Silver Spring-based Discovery Communications became a publicly traded company yesterday, a move aimed at giving it a new vehicle for acquiring programming, Internet sites and network distribution properties.

"We'll now have a currency which will help us to be more competitive in recruiting the best talent, some financial flexibility in the marketplace, and we're really going to focus on international growth," said chief executive David M. Zaslav, adding that the company's ability to issue stock or use stock to buy companies "allows us to be opportunistic in terms of acquisitions."

Discovery's A shares opened yesterday at $18.53 and closed down 25 percent, at $13.81. Non-voting C shares opened at $12.80 and closed up 25 percent, at $16.

Control of the company remains largely unchanged, but the transition from private to public streamlines its ownership structure. The new company was created from the consolidation of interests in Discovery Holding Co., controlled by billionaire John D. Malone, and Advance/Newhouse Communications, which owns the New Yorker and other magazines. Each two shares of Discovery Holding became one common A share and one non-voting C share of Discovery Communications, according to a regulatory filing.

Discovery Communications Chairman John S. Hendricks said market turmoil did not affect the company's plans to become publicly traded.

"Going public typically involves a company that's raising money on an IPO. We're not raising money. If that were the case, this would be poor timing," he said.

Discovery Holding shareholders voted to approve the merger Tuesday, and shares began trading yesterday on the Nasdaq Stock Market under transition symbols. After 20 days, A shares will switch from DISAD to DISCA. C shares are trading under DISCK. Shareholders of the former Discovery Holding control 74 percent of voting power, while Advance/Newhouse controls 26 percent of voting power and will elect three of the 11 board members.

Hendricks said Discovery is ready for the scrutiny that being a public company brings.

"Our timing is pretty good on this because if we had gone public back in the mid-'90s, after we were about a decade old, that was right in the period when we were really investing in our international platform as well as our digital platform," Hendricks said. "Whenever you make long-term investments it depresses short-term earnings. So now the timing is perfect because so much of the infrastructure investments are behind us."

Today, the company says it has 1.5 billion subscribers in more than 170 countries, and its networks include the Discovery Channel, TLC and Animal Planet. Discovery has been growing online through the acquisition of companies including United Streaming, which became the centerpiece of its online on-demand education services, and HowStuffWorks.com.

Analyst Richard Greenfield of Pali Capital said the transition to a public company will make it easier for Discovery to acquire new properties by using stock instead of having to spend cash. That could make Discovery an attractive acquisition target, Greenfield said in a Sept. 10 research report.

But Hendricks said Discovery is focusing on acquiring companies itself. "We will look aggressively at any opportunities that are out there that will relate to cable distribution, satellite or digital distribution," he said.