Source: SOPA Images / Getty
After fighting to make the initial merger happen, AT&T has decided to switch things up by creating a new media giant.
Monday (May 17), AT&T announced that it would be spinning off WarnerMedia by merging it with the TV company Discovery leading to the creation of a new media giant that could compete with streaming titans Netflix and the new kid on the block Disney+.
The new deal will see WarnerMedia properties like HBO, CNN, Cartoon Network, TBS, TNT, and the Warner Bros. movie studio plus channels like HGTV, Animal Planet, Food Network, and TLC which Discovery operates under one tent. Both companies also have their own streaming platforms with HBO Max and Discovery Plus.
As per the press release announcing the move, the boards of both AT&T and Discovery have approved the deal, and it is just waiting to be signed off by regulators. As far as the financials are concerned, the deal is an all-stock transaction. AT&T will receive $43 billion in a combination of cash, debt securities, and debt retention on behalf of WarnerMedia. At the same time, Discovery shareholders will get stock worth 71% of the media conglomerate while Discovery will get the remaining 29%.
WarnerMedia and Discovery coming together will make it the world’s second-largest media firm by revenue behind Disney, coming in with an enterprise value of $132 billion, according to the Financial Times. By merging, the companies expect to save about $3 billion annually that will be invested back into its content.
Discovery chief executive David Zaslav will head the new company, which has yet to be named. “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,” Zaslav said in a press release. “With a library of cherished IP, dynamite management teams, and global expertise in every market in the world, we believe everyone wins.”
AT&T’s decision to wipe its hands clean of the media world is nothing new and, in fact, is a trend phone companies have been following, according to Peter Kafka, who points that out in a piece for Recode. Just recently, Verizon sold off AOL and Yahoo for $5 billion, roughly half of what it originally paid for both properties, and AT&T announced it was spinning off DirectTV back in February. At the time, the new company at 16.25 billion, a significant loss compared to the $48.5 billion it originally bought the broadcast satellite provider.
We shall see what this new merger means for current HBO Max and Discovery Plus subscribers.
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Photo: SOPA Images / Getty
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