WarnerMedia to merge with Discovery in multi-billion dollar deal

Under the terms of the deal, which were announced on Monday, AT&T shareholders will receive $43bn in cash, debt securities and debt retention, on top of a 71% stake in the new company. Discovery investors will own the remaining 29%.

WarnerMedia owns the HBO network, a range of cable channels including CNN and the film and television studio Warner Bros, among others, and the deal is intended to accelerate both it and Discovery’s plans to create a leading direct-to-consumer streaming service.

The new company will be second only to Disney, with estimated 2023 revenues of around $52bn and adjusted earnings before interest, tax, depreciation and amortisation of $14bn. It will have an enterprise value of around $132bn, including $56bn in debt and expected annual synergies of around $3bn.

John Stankey, AT&T’s recently-installed chief executive, 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 re-invested in producing more great content.”

AT&T, he added, would refocus on its core telecoms business, including investing on 5G and fibre, following the deal.

Discovery long-standing chief executive David Zaslav, who will lead the new company, said: “During my many conversations with John [Stankey], we always come back to the same simple and powerful strategic principle: these assets are better and more valuable together.”

The deal is expected to close by mid-2022, subject to shareholder and regulatory approvals.

AT&T acquired WarnerMedia in 2018 for $85.4bn.