Discovery buying out Cox stake

Bids Travel Channel bon voyage in $1.3 bil deal

In a move that will streamline and consolidate its ownership structure, cable programming juggernaut Discovery Communications said Thursday that it has agreed to buy out 25% owner Cox Communications, which gets the Travel Channel in the deal.

The news boosted shares of Discovery's holding company to a 52-week high.

The company said it has signed a nonbinding letter of intent to swap the privately held cable operator's stake for $1.3 billion in cash plus the Travel Channel, and museum audio tours provider Antenna Audio.

After the deal — expected to be tax-free for both parties — parent company Discovery Holding Co. will control two-thirds of Discovery Communications instead of 50%, with Advance/Newhouse Communications retaining its one-third stake.

"This proposed transaction will simplify Discovery's ownership structure, further streamline our operations and give the company more strategic flexibility," Discovery president and CEO David Zaslav said. "Discovery is creating a more efficient decisionmaking process and building a strong, aggressive organization poised for continued growth."

The deal is expected to close by mid-May. Completion requires such steps as a definitive agreement, tax opinions determining the deal will indeed be tax-free and regulatory approvals.

A Discovery spokeswoman declined comment Thursday whether Advance/Newhouse also is likely to be bought out. Management in the past had signaled an interest in increasing its ownership stake and control in the business.

Discovery Holding Class A shares closed up 6.1% at $19.43, for a market capitalization of $5.4 billion, after going as high as $19.47 in intraday trading. They led Thursday's gainers on The Hollywood Reporter's Showbiz 50 stock index.

"We've been delighted with our investment in Discovery Communications and with the phenomenal worldwide brand that Discovery has become," Cox president Pat Esser said. "I'm particularly impressed with David Zaslav's vision for Discovery and have no doubt it will continue to be one of the most successful content companies in the world."

He added, though, that Cox is "excited about the opportunity we now have to convert (its Discovery stake) into an operational asset and to continue paying down debt incurred in our 2004 privatization."

Esser called the Travel Channel "a very successful, growing brand under the impressive leadership of Pat Younge," adding Cox is "excited about the prospects of owning and operating the channel and exploring synergies with other Cox Communications and Cox Enterprises businesses."