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Discovery Owners Consolidate Their Stock

New public company set to launch Thursday simplifies equity structure. 9/17/2008 02:31:00 AM Eastern

Basic-cable-network giant Discovery Communications is poised to untangle its complicated ownership as its shareholders agreed to consolidate its stock effective after the stock market closes Wednesday.

The new consolidated Discovery Communications is scheduled to start public trading Thursday on the NASDAQ stock exchange.

Previously, the separate publicly traded Discovery Holding owned two-thirds of the basic-cable company, and now holdout one-third owner Advance/Newhouse Programming Partnership agreed to roll its 33.3% stake in a consolidated entity.

“We expect the revised structure to provide a number of valuable benefits to Discovery shareholders, including materially improved management access, greater transparency in financial reporting, direct access to free cash flow and more meaningful consensus estimates for Discovery Communications,” Morgan Stanley told investors in a note.

The consolidation was orchestrated by Liberty Media chief John Malone, who also leads Discovery Holding. After the combination of stakes, Malone is expected to control 23% of Discovery's aggregate voting power, while Advance/Newhouse would have 26%, according to The Wall Street Journal.

To eject noncore assets, Discovery Holding is spinning off its 100% ownership in video-facilities outfit Ascent Media.

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