AT&T and Discovery on Monday announced a definitive agreement to combine WarnerMedia’s premium entertainment, sports and news assets with Discovery’s leading nonfiction and international entertainment and sports businesses to create a premier, standalone global entertainment company led by Discovery CEO David Zaslav.
Under the terms of the agreement, which is structured as an all-stock transaction, AT&T would receive $43 billion in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt, and AT&T’s shareholders would receive stock representing 71% of the new company; Discovery shareholders would own 29% of the new company.
The name of the new company hasn’t been determined, nor has the management structure. For now “Jason Kilar remains CEO of WarnerMedia,” said AT&T John Stankey at a press conference early Monday. “David’s got decisions on what he wants to do on who will be in what role moving forward.”
The boards of both AT&T and Discovery have approved the transaction.
The partners said today the new company will compete globally in the fast-growing direct-to-consumer business, bringing compelling content to DTC subscribers across its portfolio, including HBO Max and the recently launched discovery+. It will combine WarnerMedia’s storied content library of popular and valuable IP with Discovery’s global footprint, trove of local-language content and deep regional expertise across more than 200 countries and territories. The new company will be able to invest in more original content for its streaming services, enhance the programming options across its global linear pay TV and broadcast channels, and offer more innovative video experiences and consumer choices.
The transaction is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals. No vote is required by AT&T shareholders. Agreements are in place with Liberty Media’s John Malone and Advance to vote in favor of the transaction.
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.
“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,” said AT&T CEO John Staneky. “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.”
“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,” said Zaslav.
“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.”
More to come… A press conference is underway, followed by a separate call with investors.