AT&T and Discovery rocked Hollywood with the combination that will see WarnerMedia and Discovery rolled together into a new standalone public entertainment company led by Zaslav — as AT&T exits the sector and Discovery doubles down.
Under the terms of the agreement, structured as a spinoff and expected to close mid-next year, AT&T would receive $43 billion in a combination of cash, debt securities, plus would benefit by WarnerMedia retaining some debt. AT&T’s shareholders will end up with stock representing 71% of the new company, Discovery shareholders with 29% of the new company.
The move has spurring talk of a domino effect of mega-deals as the streaming battle — with HBO Max and Discovery+ soon to be uner one room — now becomes really high stakes and players are pressured to scale up.
Another change for Zaslav is that his contract yesterday to helm Discovery was extended through the end of 2027. Financial terms weren’t released but will be in an SEC filing this week.
Separately, this morning, Zaslav along with AT&T CEO John Stankey and Discovery’s Chief People and Culture Officer, Adria Alpert Romm, fielded a Town Hall meeting for Discovery staffers that was said to be uneventful, as all of the three spoke briefly, with no Q&A.
The two CEO’s have had lots of exposure over the past few days, including briefings with the press and financial analysts, TV appearances and Stankey’s meeting yesterday with WarnerMedia employees.
Zaslav thanks his staff – “I wanted to first just talk about our company. And I wanted to take a moment to recognize the
extraordinary efforts of all of you on this call.”
“But when I got here a little over 15 years ago, we were
basically Discovery Channel itself was 80 percent of the company, and we had the Learning Channel and we had Animal Planet, which I don’t even think was getting a sub-fee at that time, and we were in I think a few countries, but very few,” he said, according to a transcript of the event. It went on to launch more channels, acquire Eurosport and Scripps.
“We’re a different company, and all of us, the board, myself, we’re all really proud of all you’ve accomplished. You gotta take a deep breath because thanks to this deal and the changing world
we’re all gonna have to double down, but we’re gonna get to do it with what I believe are the greatest assets in media.”
Stankey, who became CEO of AT&T last July, said he was forced the rethink the logic behind the initial Time Warner deal from 2018. “The media business really needs to be able to go out and hunt globally. And grow globally. And it needs some scale of additional content and additional depth of library and additional creative talent to come together to really be one of those big platforms that ultimately survives in the world going forward,” he said. “And I had to make sure that we did things that put us in that position and that’s kinda why we’re here.”
AT&T itself is completely divesting the business although Stankey has said several times that as an A&T shareholders he’ll wind up with a stake in the combined company.
AT&T stock has taken a beating since the deal news despite being on the receiving end of a $43 billion payment that will take big chunk out of its massive debt. The fact that the company has had to unroll two big deals — for DirecTV, which sits in a joint venture with TPG, and WarnerMedia. It also plans to reduce the dividend when the WarnerMedia deal closes, which was a shocker to shareholders who have long see the payout as a steady-eddy perq from their AT&T holdings.