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Liberty’s Discovery starts Nasdaq run

Viacom, Clear Channel also planning spinoffs

John Malone’s Liberty Media Corp. completed the spinoff Thursday of its 50% stake in Discovery Communications into the independent publicly traded Discovery Holding Co. New entity also is home to Liberty’s full stake in Ascent Media, a media services company.

The Discovery Communications cable net empire includes the flagship Discovery Channel, TLC, Animal Planet, the Travel Channel, Discovery Health Channel and numerous emerging U.S. nets and international feeds.

Viacom and Clear Channel also are planning spinoffs in the hunt to unlock value and pump up a flat stock price by giving investors clearer access to specific entertainment properties. Likewise, Time Warner intends to spin off Time Warner Cable into a new company.

Wall Streeters noted that there is a key difference, however, between the Liberty spinoff and those being put into action by the likes of Viacom — namely, that Liberty only owns 50% of Discovery Communications,

Limited access

Cable operator Cox Communications and Advance/Newhouse Communications own the remaining 50%, meaning Discovery Holding Co. doesn’t have full management control of the stable of cable nets, nor can it report or tap into certain financials.

Fulcrum Global Partners media analyst Richard Greenfield questioned why investors would want to invest in a public company that won’t have access to Discovery Communications’ free cash flow.

Some Wall Streeters predicted that Cox and Newhouse might eventually fold their stakes into the new company, but such a move might have to wait at least two years because of tax issues associated with the spin off of Discovery Holding.

Greenfield also reduced expectations for Discovery Holding because of ratings declines in recent months at core networks Discovery Channel and TLC. He said these dips could impact ad revs and reduce profitability this year and next.

In the spinoff, Liberty shareholders as of July 15 received one-tenth of a share in the new company for every share they held in Liberty Media.

Discovery Holdings shares closed at $14.94 in their first full day of trading on the Nasdaq.

Liberty Media shares were up 9¢ to close at $8.51 in trading Thursday.

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