U.S. telecom giant AT&T announced it will merge its WarnerMedia service with rival Discovery Inc., marrying their assets to create a business venture to the value of a reported $438 billion according to Newsbreak.
The move comes just a few years after AT&T acquired CNN, HBO, and Warner Bros and following the shocking 2020 Christmas morning bombing of an AT&T equipment hub located about a block away from the telecom giant’s regional offices in Nashville.
Regardless, the new enterprise is slated now to develop one of the world’s largest global entertainment companies.
The merger will place Hollywood’s largest studios and Discovery’s network under the same proprietorship. AT&T said it will use the $43 billion in the tax-free spin-off of its media assets, as an abatement of its $160.7 billion debt.
AT&T’s shareholders will receive stock constituting 71 percent of the new company, while Discovery’s will be issued the remaining 29 percent. The deal is structured as a tax-advantaged Reverse Morris Trust.
The amalgamation joins movie giant Warner Bros Entertainment, with Discovery’s Lifestyle and Food Network, including nature and science research programs. The new company will possess one of the most extensive libraries on the planet, with virtually 200,000 hours of the most well-known shows and programs.
More than 100 of the biggest brands will be placed under one international portfolio, consisting of HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, the Turner Networks, TNT, TBS, Eurosport, Magnolia, TLC, Animal Planet, ID, and lots more.
The Board of Directors will consist of 13 members. 7, including the Chairman of the Board, will be appointed initially by AT&T. Discovery will appoint 6 members, including CEO David Zaslav, who will captain the company.
AT&T CEO John Stankey lauded the deal as a bonanza for his shareholders, “For AT&T shareholders, this is an opportunity to unlock value and be one of the best-capitalized broadband companies, focused on investing in 5G and fiber to meet substantial, long-term demand for connectivity”, he said
Discovery President & CEO David Zaslav told reporters, “We think together, the combination makes us the best media company in the world,” mentioning the $20 billion that the combined company will spend on content.
“We will be one company, one culture, one mission: Great stories, great content that entertains people in every country around the world.”
Concerning the company’s commitment to CNN and international news properties, already owned by Discovery, Zaslav said, “Our mission is to lean into news, put it together with CNN, and be the world leader in news.”
It’s been five years since AT&T’s amalgamation with Time Warner as the company sought to become the largest virtual content and distribution firm globally.
AT&T closed its $85 billion deal to buy CNN’s parent company, Time Warner Media Inc., in 2018 following a protracted battle with the Justice Department after U.S. antitrust regulators indicated they would not seek a delay.
In 2016, AT&T announced a merger with Time Warner. After former President Trump said of the merger that “personally, I’ve always felt that that was a deal that’s not good for the country,” the Department of Justice filed a lawsuit in 2017 to block the merger alleging the deal violated antitrust laws.
In 2018, a six-week trial was held in the U.S. District Court of Washington, D.C., where Judge Richard Leon, a George W. Bush appointee, presided. Leon ultimately ruled in favor of AT&T and Time Warner on June 12, 2018. Three days later, AT&T announced it had acquired Time Warner.
In the deal, AT&T acquired a litany of media giants, notably, HBO and Cinemax, Turner Entertainment Networks, Turner Broadcasting, Turner Sports, CNN News Group, DC Entertainment and DC Films, New Line Cinema, and all of the Warner Bros. suite of companies.
With assets like HBO, CNN, and TNT, the acquisition of Time Warner by AT&T opened channels for online videos and new opportunities for selected advertising. Nevertheless, AT&T encountered a steady decline in TV subscribers and monetary services due to content-cost pressure, high programming costs, and new video program costs according to Ars Technica.
Customers canceled their TV subscriptions in favor of streaming options from Netflix, Hulu, and other cheaper services. Compared with over 100 million subscribers for Disney+ and 207.6 million for Netflix, even with significant investments and a hardy grip on the HBO Max streaming platform, AT&T has trailed its rivals with only 63.9 million global subscribers and with a higher subscription fee of $15 a month.
In January, Discovery, Oprah Winfrey Network, HGTV, and broadcaster Eurosport launched a $5 a month streaming service. Zaslav told the Financial Times it was “the most important new business” since he joined the company over a decade ago.
In February, AT&T agreed to a sale involving a minority stake in satellite television service DirecTV to private equity firm TPG at less than a quarter of its purchase price in 2015. AT&T will use $7.8 billion as a down payment against its increasing debt load.
The merger is expected to be finalized in mid-2022, pending approval by Discovery shareholders.
In a similar move, Verizon Media recently announced a $5 billion deal with Apollo Management to sell its Yahoo and AOL properties.