May 21, 2022

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AT&T, Discovery Agree To Merger Of CNN And Other Media Assets

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AT&T, Discovery Agree To Merger Of CNN And Other Media Assets

AT&T Inc. has agreed to merge its WarnerMedia division with Discovery Communications Inc., creating a streaming giant to compete with Walt Disney Co.’s Disney+ and Netflix.

The combined company will own channels including CNN, HBO, TNT, TBS, Animal Planet, Food Network and the Warner Bros. franchise. 

TickerSecurityLastChangeChange %
TAT&T, INC.33.55+1.33+4.14%
DISCADISCOVERY, INC.37.02+1.37+3.84%

Under the terms of the deal, which is structured as an all-stock transaction, AT&T would receive $43 billion in cash and debt with its shareholders controlling 71% of the new company. Discovery shareholders would own the remaining 29%. Both AT&T and Discovery’s board of directors have approved the merger, which still must be given the green light by Discovery shareholders. If approved, the transaction is expected to close in mid-2022.   

The deal comes nearly three years after AT&T closed on its $85.4 billion acquisition of Time Warner Inc. 

“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,” said Discovery President and CEO David Zaslav in a press release. 

Zaslav will lead the new company, which will retain executives from both AT&T and Discovery

“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,” AT&T CEO John Stankey said. 

AT&T will adjust its dividend to account for the distribution of WarnerMedia to AT&T shareholders. The company expects an annual dividend payout ratio of 40% to 43% on more than $20 billion of expected free cash flow.

AT&T shares were up 12% this year through Friday while Discovery shares were higher by 18%.

VIA: foxbusiness

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