AT&T to broker $43 billion deal for WarnerMedia and Discovery

Author | Tian Zhe

Telecom giant AT&T announced on Monday that its content division WarnerMedia will merge with Discovery, paving the way for competition with Netflix and Disney.

Under the agreement, AT&T will unwind its $85 billion acquisition of Time Warner and combine it with Discovery to form a new media company. The deal will create a new business independent of AT&T, including debt, and could be valued at as much as $150 billion, according to the Financial Times.

AT&T said that after the merger, AT&T will receive a total of $43 billion in funds, including cash, debt and certain debts of Warner Media. In terms of share distribution, AT&T shareholders will receive 71% of the shares of the new company, and Discovery shareholders will receive 29% of the shares.

If the deal is approved by regulators, it would alter AT&T's multiyear plan to combine content and distribution into a vertically integrated company. The companies said the transaction is expected to close by mid-2022.

Discovery shares rose as much as 9% Monday morning but were down 5% by the end of regular trading. AT&T shares fell 2%.

AT&T said the new company will be led by David Zaslav, president and CEO of Discovery, and the company's name will be announced in the coming days. It is reported that the company committee will be composed of 13 members, of which AT&T will appoint 7 members including the chairman, and Discovery will appoint 6 members including Zaslav.

“It’s very exciting to unlock so much value and opportunity by bringing together these historic brands, world-class journalism and iconic franchises,” said David Zaslav. He went on to add that AT&T and Discovery’s assets “will be even better and more valuable together.”

The new company’s sole mission, he said, is to “ focus on telling the best stories and having a ton of fun doing it. ”

However, the future of Jason Kilar, the current CEO of WarnerMedia, is uncertain. In a press release following the announcement, Jason Kilar still retains his title, but it will be up to David Zaslav to decide whether Jason Kilar will continue to work at the new company.

It is reported that after the acquisition of Warner Media is completed, AT&T will own media such as CNN, HBO and Warner Bros.

David Zaslav said at a news conference on Monday that he believes the combined company will be able to differentiate itself from top streaming services like Disney+ and Netflix by offering news and sports on top of entertainment offerings like "Game of Thrones" and "Harry Potter."

David Zaslav also revealed that the new company plans to retain CNN with the goal of "taking advantage of all the news we have and merging it with CNN to become the leader in world news."

Stankey and Zaslav said the two companies are already spending $20 billion a year on content, putting them on par with Netflix, which currently spends about $17 billion a year.

In an interview with CNBC's The Wall Street Journal, David Zaslav said the new company's goal is to have 400 million streaming subscribers worldwide, while the two companies currently have 100 million subscribers.

HBO and HBO Max reportedly have about 64 million subscribers worldwide, and Discovery hit 15 million paying subscribers last month.

By comparison, Netflix already has about 208 million subscribers worldwide, while Disney+ surpassed 100 million in less than a year and a half after its launch.

Compiled from:

https://www.cnbc.com/2021/05/17/att-to-combine-warnermedia-and-discovery-assets-to-create-a-new-standalone-company.html