AT&T announces deal to merge WarnerMedia with Discovery
- Under the terms of the agreement, AT&T said it would receive an aggregate amount of $43 billion in a combination of cash, debt and WarnerMedia's retention of certain debt.
- Discovery shareholders would own 29% of the new company, it added.
- Shares of U.S. media company Discovery were seen 14% higher in pre-market trading, while AT&T's stock price was up around 5%.
U.S. telecoms giant AT&T on Monday announced a deal combining its content unit WarnerMedia with Discovery, paving the way for one of Hollywood's biggest studios to compete with the likes of rival media giants Netflix and Disney.
Under the terms of the agreement, AT&T said it would receive an aggregate amount of $43 billion in a combination of cash, debt and WarnerMedia's retention of certain debt.
AT&T shareholders would receive stock representing 71% of the new company, while Discovery shareholders would own 29%, it added.
It comes after reports over the weekend that the companies were in advanced talks to complete the merger.
If approved by regulators, the deal effectively reverses AT&T's years-long plan to combine content and distribution in a vertically integrated company.
The deal would create a new business, separate from AT&T, that could be valued at as much as $150 billion including debt, according to The Financial Times.
Shares of U.S. media company Discovery were seen 14% higher in pre-market trading, while AT&T's stock price was up around 5%.
"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," John Stankey, CEO of AT&T, said in a statement.
"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," he added.
Leaderhip and governance
AT&T said Discovery President and CEO David Zaslav would lead the new company. The Board of Directors would consist of 13 members, seven initially appointed by AT&T including the chair of the board, and Discovery would appoint six members, including Zaslav.
"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, adding that AT&T and Discovery's assets "are better and more valuable together."
The new firm's singular mission, Zaslav said, is "to focus on telling the most amazing stories and have a ton of fun doing it."
AT&T owns CNN, HBO and Warner Bros after it acquired Time Warner, since renamed to WarnerMedia, for $109 billion in 2018. Discovery's channels include Animal Planet and the Discovery Channel.
WarnerMedia-owned HBO and HBO Max reportedly have around 64 million subscribers worldwide. Discovery said last month it had reached 15 million paying subscribers.
By contrast, Netflix currently has around 208 million global subscribers, while Disney+ recently surpassed 100 million less than a year-and-a-half after the streaming service launched.
— CNBC's Alex Sherman contributed to this report.
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