The US carrier AT&T has announced a plan to spin off its WarnerMedia division and merge it with Discovery in a major transaction worth a reported $438 billion.
AT&T Brings HBO Max and Discovery+ Under One Roof
The massive deal will give WarnerMedia parent AT&T $43 billion in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt. The deal follows a similar move from Verizon Media, which just recently announced a $5 billion deal with Apollo Management to sell its Yahoo and AOL properties.
A new, yet-to-be-named standalone media company will be run by Discover CEO David Zaslav. "I think we fit together like a glove," he said at a virtual presser.
The new company will start with $55 billion in debt.
Merging WarnerMedia, which owns HBO Max, with Discovery, which operates the Discovery+ streaming service, will bring more than 100 popular entertainment brands under one roof, including Animal Planet, Cartoon Network, CNN, DC Comics, Discovery, Eurosport, Food Network, HBO, HGTV, Magnolia, the Turner Networks, TNT, TLC, and Warner Bros.
Creating a Streaming Media Giant
AT&T announced a "pure-play" deal that would create a streaming media giant in a press release, saying that AT&T shareholders will have a 71 percent share in the new company while Discovery shareholders will receive stock accounting for the remaining 21 percent share. The deal is pending regulatory approval and should be finalized by mid-2022.
AT&T CEO John Stankey 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 reinvested in producing more great content to give consumers what they want.
If anything, the move proves that AT&T is aware of the fact that its acquisition of Time Warner has not yielded the fruits it promised. With all those brands now operated under a new company, AT&T can focus on its own business while those individual content companies can manage their businesses more independently than before.
Discovery President and CEO David Zaslav will lead the combined standalone company.
AT&T did not say whether WarnerMedia CEO Jason Kilar might have a role in the new company. For the employees of both companies, however, this could be a time of uncertainty due to the cuts, with "at least $3 billion in expected cost synergies."