News

DCI Quietly Buys Out Health Rival

8/31/2001 10:31 AM Eastern

Discovery Communications Inc. has quietly bought out The Health Network --
the principal rival of its own Discovery Health Channel -- for $255 million,
sources said.

The deal appears to set the stage for Discovery to merge THN -- formerly
owned by News Corp.'s Fox Cable Networks Group -- with Discovery Health. Such a
move might resonate with operators that have questioned whether there is enough
carriage space or consumer appetite for two health-themed cable channels.

Discovery Health is now in 28 million homes, and it has commitments that will
take it to 55 million by the end of 2004. THN is in 24.5 million households with
commitments for a total of 44 million by 2006.

According to information from sources and a News Corp. securities filing,
News Corp.-owned Fox Entertainment Group, parent of the Fox cable networks, sold
THN to DCI subsidiary Discovery Health for $155 million in cash and a 10 percent
interest in Discovery Health. That equity stake is worth at least $100 million,
the sources said.

That makes the total price at least $255 million, or a little over $10 for
each of THN's 24.5 million subscribers.

In contrast, recent pricey sales of bigger networks -- such as Black
Entertainment Television's sale to Viacom Inc. or The Walt Disney Co.'s buyout
of Fox Family Channel -- have ranged from $47 (BET) to $50 (Fox Family) per
subscriber.

The relatively low price appears to indicate Fox's lack of interest in
further developing a network that was cobbled together from two smaller networks
and orphaned after a joint venture with WebMD Corp. cratered earlier this
year.

Officials at Fox Cable declined to comment Friday, and DCI officials couldn't
be reached for comment.

Under terms of the deal, within a three-year framework, Fox Cable can 'put,'
or sell back, its stake in the Discovery Health unit -- with worldwide
medical-related businesses including Web sites and other holdings -- to DCI for
either $100 million or its fair-market value, whichever is greater, according to
a knowledgeable source.

The THN sale was mentioned in a little-noticed clause in a May Securities and
Exchange Commission filing by Fox Entertainment Group, the News Corp. unit that
includes Fox Cable. But that filing did not name the buyer.

The sale closed in recent weeks, sources said. But both sides have kept quiet
about it, apparently to give DCI time to talk with operators about their
plans.

Mike Reynolds and Mike Farrell contributed to this
story.

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