The deal will give AT&T proceeds of $43bn along with a 71% stake in the new company
AT&T will separate its WarnerMedia business and combine it with Discovery. (Credit: AT&T Intellectual Property)
US-based telecom company AT&T has agreed to merge its WarnerMedia business with Discovery to create an independent streaming company.
As per the terms of the deal, AT&T will be paid $43bn through a mix of cash, debt securities, and WarnerMedia’s retention of certain debt. Apart from that, its shareholders will get a 71% stake in the new company with the remaining 29% interest to be held by Discovery’s shareholders.
The deal will combine the entertainment, sports, and news assets of WarnerMedia with Discovery’s nonfiction and international entertainment and sports businesses.
It is expected to expedite the plans of both companies for providing leading direct-to-consumer (DTC) streaming services for consumers across the world.
The new company is expected to offer compelling content to DTC subscribers from its various assets that include HBO Max, discovery+, CNN, Warner Bros., Discovery, Animal Planet, Eurosport, Cartoon Network, and others.
Discovery president and CEO David Zaslav will lead the new company.
Zaslav said: “With a library of cherished IP, dynamite management teams and global expertise in every market in the world, we believe everyone wins…consumers with more diverse choices, talent and storytellers with more resources and compelling pathways to larger audiences, and shareholders with a globally scaled growth company committed to a strong balance sheet that is better positioned to compete with the world’s largest streamers.”
The transaction will give scope to AT&T and its shareholders to unlock value in the company’s media assets. Besides, the deal will help in improving the position of the media business to benefit from the attractive DTC trends in the industry.
By improving its capital structure through the spin-off of its media business, AT&T expects to become one of the best capitalised 5G and fibre broadband firms in the US.
AT&T CEO John Stankey said: “For AT&T shareholders, this is an opportunity to unlock value and be one of the best capitalised broadband companies, focused on investing in 5G and fibre to meet substantial, long-term demand for connectivity.
“AT&T shareholders will retain their stake in our leading communications company that comes with an attractive dividend. Plus, they will get a stake in the new company, a global media leader that can build one of the top streaming platforms in the world.”
The deal, which is subject to approval by Discovery’s shareholders, regulatory approvals, and other customary closing conditions, is expected to close in mid-2022.