Malone Ups Discovery Holdings
By Mike Farrell -- Multichannel News, 3/29/2007 7:08:00 PM
After nearly two years of negotiations, Liberty Media chairman John Malone finally got closer to full control of Discovery Communications after the group of networks signed a letter of intent to acquire Cox Communications’ 25% interest in the networks for $1.275 billion in cash and Travel Channel.
According to a statement by Discovery, Discovery Holding Co. -- in which Liberty placed its 50% interest in DCI in a spinoff in 2005 and where Malone also serves as chairman and CEO -- will boost its holdings in DCI to 66% from 50%, with partner Advance/Newhouse Communications increasing its stake from 25% to 33%. It is expected that Discovery founder John Hendricks will retain his 1% ownership interest in DCI. In addition, Cox will gain control of Antenna Audio, a U.K.-based museum-audio-tour business Discovery acquired last year.
“This proposed transaction will simplify Discovery’s ownership structure, further streamline our operations and give the company more strategic flexibility,” DCI CEO David Zaslav said in a prepared 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.”
Liberty spun off its 50% interest in DCI in 2005, creating Discovery Holding, which also includes Liberty’s 100% interest in Ascent Media Group, which provides production services to the film and television industries. At the time of the spinoff, it was speculated that DHC would buy out Cox and Advance-Newhouse, but that deal never came to fruition.
DCI had been criticized in the past because of its complicated ownership structure -- although Liberty owned 50% of the networks, it could not make major business decisions without the consent of 80% of its shareholders, meaning that Liberty, Cox and Advance-Newhouse had to sign off on practically every business decision.
While the new structure will simplify Discovery, any major decisions will still need the consent of Advance-Newhouse, a cable executive familiar with the deal said.
The next step will likely be Liberty’s attempt to buy out Advance-Newhouse’s stake in the group of networks. However, when that would take place or if Advance-Newhouse is willing to sell remains to be seen.
DCI owns more than 100 domestic and international cable channels, including Discovery Channel, Discovery Health, Animal Planet and TLC.
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