IPO Watch: Buying Discovery Channel

Posted December 17, 2007

"With Fox airing a game show involving a lie detector and a bunch of very personal questions and ABC offering up a series called simply Dirty Sexy Money, maybe its time to gamble on middling-brow programming" — Stephanie Grimmett

by Stephanie Grimmett

Baltimore – (TFN) I miss the days when the Discovery Channel used to be about science and new technology instead of the latest reality television fad.

But I guess we can definitely say that, financially, the decision to move from hardcore science to Deadliest Catch and Dirty Jobs was a good one. And Discovery Communications, which owns the Discovery Channel, along with TLC, the Travel Channel, BBC America and Animal Planet, will cash in on its success in a few months.

Washington, D.C.-based Discovery Communications just announced that it will go public in the second quarter of 2008. The company has yet to quantify the size and pricing of its IPO. But chief executive David Zaslav said that the move will give the company more agility and strength. And while he didn’t say so explicitly, the move will also allow for more new acquisitions.

Being public means Discovery Communications will have an easier time securing loans for acquisitions, instead of spending its cash on buyouts. And the company is definitely in the market for new subsidiaries and growth. It bought Treehugger.com and HowStuffWorks.com this year, and plans to expand its programming on its 100 networks worldwide.

But stock in Discovery Communications was available, somewhat circuitously, before now. Cable baron John Malone owned 49% of Discovery Communications in 2005, when he moved his stake in the company into a separate public venture, Discovery Holding Company (DISCA: NASDAQ).

But in preparation for a true public offering, Discovery Communications bought out major investor, Cox Communications, and the company plans to give other partial owner Advance/Newhouse, owner of publishing juggernaut Conde Nast, among other ventures, preferred shares and two seats on its new board.

Wall Street expects the new public company to trade for around $30 per share, approximately equivalent with the price of Discovery Holdings.

Zaslav has said he doesn’t believe the pressures of being a public company will force any of his channels to move toward more lowbrow programming, even if TLC has given up its original moniker (remember when it was The Learning Channel) and the Discovery Channel has turned toward, shall we say more “experiential” science instead of the kind involving diagrams of the universe or computer animation of prehistoric animals.

But with Fox airing a game show involving a lie detector and a bunch of very personal questions and ABC offering up a series called simply Dirty Sexy Money, maybe its time to gamble on middling-brow programming.

Keep your eye out for the Discovery Communications IPO in the second quarter of 2008. And we’ll be sure to keep you updated on this IPO, as well as other IPO opportunities in the coming year on Today’s Financial News.

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