Bloomberg News

Discovery Communications to Buy Out Cox's 25% Stake

March 29, 2007

Discovery Communications Inc. (DISCA:US), the producer of documentary channels on cable television, will buy Cox Communications Holdings Inc.'s 25 percent share of the company, boosting billionaire John Malone's stake.

Cox will receive $1.28 billion and ownership of the Travel Channel and Antenna Audio, which provides self-guided tours and multimedia presentations at museums, Silver Spring, Maryland- based Discovery said today in a statement.

The purchase gives Malone's publicly traded Discovery Holding Co. (DISCB:US) a 66 percent stake in the cable programmer, which produces channels including TLC, Animal Planet and Discovery Health. Malone must still buy out minority investor Advance/Newhouse Communications to gain full control.

``He still doesn't have ability to consolidate'' his hold on Discovery Communications, said David Joyce, an analyst at Miller Tabak & Co. in New York.

Discovery Holdings spokesman John Orr didn't return phone calls seeking comment.

``This proposed transaction will simplify Discovery's ownership structure, further streamline our operations and give the company more strategic flexibility,'' David Zaslav, chief executive officer of Discovery Communications, said in the statement.

Zaslav, a former NBC executive, joined Discovery in November.

Fewer Partners

Class A shares (DISCA:US) of Discovery Holding rose $1.12, or 6.1 percent, to $19.43 at 4 p.m. New York time in Nasdaq Stock Market trading. They have gained 21 percent this year. Malone, also chairman of Liberty Media LLC, has a 31 percent voting stake in Englewood, Colorado-based Discovery Holding, according to last year's proxy statement.

Analysts had expected Malone's Discovery Holding to eventually buy out partners including Advance/Newhouse, Joyce said. The deal eliminates one partner and increases the ownership of the remaining investors.

``This may point to DCI going public on its own rather than becoming part of Discovery Holding,'' Joyce said.

Under the new ownership structure, Advance/Newhouse will continue to own one-third of Discovery Communications and will have veto power over any decision to take the company public or merge it with other Malone-related interests, according to a Feb. 28 regulatory filing. Discovery founder John Hendricks owns one share.

Closely held Cox was an original investor in Discovery in 1986. The Atlanta-based cable operator opted to cash out after 20 years and to use the proceeds to repay debt incurred when it went private in 1994, President Pat Esser said in an interview.

Esser said Discovery has been a good investment for Cox but the sale made sense because Discovery does not pay dividends. ``You can't get cash flow out of it,'' said Esser.

To contact the reporter on this story: Christopher Stern in Washington at cstern@bloomberg.net

To contact the editor responsible for this story: Emma Moody at emoody@bloomberg.net.


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Companies Mentioned

  • DISCA
    (Discovery Communications Inc)
    • $44.83 USD
    • 0.40
    • 0.89%
  • DISCB
    (Discovery Communications Inc)
    • $45.3 USD
    • -1.62
    • -3.58%
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