Liberty will spin off its 50% stake in Discovery Communications and the entirety of its Ascent Media holdings into a new public company as Dr Malone shuffles his portfolio to boost shareholder value. The deal comes 1 year after Liberty announced plans to spin off overseas assets; it could either clear the way for the good Dr to take full ownership of Discovery or set the stage for another media conglomerate (e.g., News Corp, Viacom, Time Warner, Comcast) to buy him out. Based on its ’04 operating cash flow, the Discovery assets alone are worth $10bln-$15bln, assuming single-digit percentage growth in ’05 and a 15x-20x multiple. The transaction is expected to close in the spring; it will cede investors .05 share of Discovery Holding Co for each held series A and/or B share. The Doctor’s juking surprised the Street, but Smith Barney analyst Niraj Gupta said the structure "should unlock value for Liberty shareholders," since the company will use DHC to build and acquire programming assets. Gupta said DHC could be a clean way to get Cox and Advance/Newhouse to relinquish their respective 25% stakes in Discovery. Not everyone was pleased; S&P and Fitch cut Liberty’s unsecured debt to BB-plus, the highest junk rating. Earnings: Liberty said its 4Q net loss narrowed to $2mln, or break-even on a per-share basis, from $931mln, or 32 cents/share, YOY. Revenue rose to $2.35bln. Sales at QVC rose 16% to $1.8bln; Starz sales gained 5.5% to $248mln. Discovery’s annual revenue was up 19% to $2.4bln.