AT&T and Discovery have announced an agreement to combine WarnerMedia’s entertainment, sports and news assets with Discovery's non-fiction and international entertainment and sports businesses to create a standalone global entertainment company.
Under the terms of the agreement, which is structured as an all-stock, AT&T will receive US$43 billion (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt. AT&T’s shareholders would receive stock representing 71% of the new company; Discovery shareholders would own 29% of the new company. The boards of directors of both AT&T and Discovery have approved the transaction.
The companies announced that Discovery's president and CEO David Zaslav will lead the proposed new company with a management team and top operational and creative leadership from both companies.
The new company’s board of directors will consist of 13 members, seven initially appointed by AT&T, including the chairperson of the board; Discovery will initially appoint six members, including Zaslav.
According to a statement, the teams believe that the new company will have significant scale and investment resources with projected 2023 revenue of approximately $52 billion.
John Stankey, CEO, AT&T, said, “This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms. It will support the fantastic growth and international launch of HBO Max with Discovery’s global footprint and create efficiencies which can be re-invested in producing more great content to give consumers what they want. 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 fiber 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.”
Zaslav said, "During my many conversations with John, we always come back to the same simple and powerful strategic principle: these assets are better and more valuable together. It is super exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity. 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. We will build a new chapter together with the creative and talented WarnerMedia team and these incredible assets built on a nearly 100-year legacy of the most wonderful storytelling in the world. That will be our singular mission: to focus on telling the most amazing stories and have a ton of fun doing it.”
The transaction is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals.