AT&T’s WarnerMedia and Discovery, Inc. will join together to form a standalone company. AT&T and Discovery made the announcement this morning after stories emerged about the combination on Sunday.
Transaction Summary
- Structured as an all-stock, Reverse Morris Trust transaction
- AT&T shareholders to own 71% of new company, Discovery shareholders to own 29%
- AT&T to receive $43 billion (subject to adjustment) in a combination of cash, debt securities and WarnerMedia’s retention of certain debt
- New company to be led by Discovery CEO David Zaslav and overseen by a 13 member board – 7 initially appointed by AT&T, including the chairperson, and 6 initially appointed by Discovery, including Zaslav
The two companies say the deal combines WarnerMedia’s studios and portfolio of iconic scripted entertainment, animation, news and sports with Discovery’s global reach in real-life, non-fiction entertainment.
AT&T and Discovery believe the deal will unlock value and is expected to create at least $3 billion in annual cost synergies to “increase investment in content and direct-to-consumer platform.”
Brands Involved
WarnerMedia brings brands like HBO, CNN, TBS, and Warner Bros. to the deal. Meanwhile, Discovery has it’s own Discovery network and other networks included HGTV, Animal Planet and TLC. In total, 100 brands will now be part of a single portfolio.
Most importantly, both have their direct to consumer streaming services, HBO Max and Discovery+. Consolidation has long been expected in the streaming world as media companies arm to compete with Netflix and Disney+. Smaller streamers like Paramount+ from ViacomCBS and Peacock from Comcast were other streamers where partnerships were also expected.
Shareholder Value and Growth
AT&T sees two independent companies as an opportunity to “unlock significant value in WarnerMedia for their shareholders.” One company will focus on broadband connectivity and other on media. AT&T sees investment in mobile and fixed broadband as growth areas.
For Discovery shareholders, this deal creates a “globally scaled growth company…better positioned to compete with the world’s largest streaming services.”
