Discovery looking at Scripps?

Discovery Holding’s shareholders approved a scheme to spin off the business into a new public company. The timing may not be perfect, but on Sept 16 it was agreed to combine those assets controlled by John Malone and his Discovery Holding Co along with the elements owned by Advance/Newhouse. Shares might start selling today (Sept 18).

David Zaslev, Discovery’s CEO, said the target is to grow the business “internally” but the stock could also be leveraged to acquire other related businesses, including cable channels, other new media assets as well as content archives. Zaslev told the Wall Street Journal that content was the focus of any acquisition target.

Gossip suggests that Ohio-based E W Scripps Company’s cable TV assets might be in Discovery’s line of sight. Scripps’ multichannel assets are impressive and include HDTV, Food Network, DIY Network, Fine Living and others, all of which might fit nicely into Discovery’s growing hunger for leisure-based hobby channels.

Discovery also has plans to launch its own Health channel in partnership with Oprah Winfrey.

There are other consequences to the new company’s actions. Here are the steps as outlined by Discovery:

• DHC will spin-off to its stockholders (the "Spin-off") a wholly-owned subsidiary, Ascent Media Corporation ("AMC"), holding the networks and creative services businesses of Ascent Media Group ("Ascent Media").

• Immediately following the Spin-off, DHC will combine with a subsidiary of Discovery Communications, Inc. ("DCI"), and existing DHC shareholders will receive shares of common stock of DCI.

• As part of the same plan, Advance/Newhouse will contribute its interests in Discovery and Animal Planet to DCI in exchange for preferred stock that, immediately after the closing of the transaction, will be convertible into shares representing one-third of the outstanding shares of common stock of DCI. The preferred stock held by Advance/Newhouse will entitle it to elect three members of DCI's board of directors and to exercise approval rights with respect to the taking of specified actions by DCI and its subsidiaries.

• As a result of the transaction, DCI will become a public company and will own 100% of Discovery and Animal Planet.