David Zaslav
AT&T Inc. and Discovery, Inc. 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.
Under the terms of the agreement, which is structured as an all-stock, Reverse Morris Trust transaction, AT&T would receive US$43 billion (subject to adjustment) 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 Boards of Directors of both AT&T and Discovery have approved the transaction. Discovery President & CEO David Zaslav will lead the new company with executives from both companies in key leadership roles.
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+.
The companies expect the transaction will create substantial value for AT&T and Discovery shareholders by:
• Bringing together the strongest leadership teams, content creators, and high-quality series and film libraries in the media business.
• Accelerating both companies’ plans for leading direct-to-consumer (DTC) streaming services for global consumers.
• Uniting complementary and diverse content strengths with broad appeal — WarnerMedia’s robust studios and portfolio of iconic scripted entertainment, animation, news, and sports with Discovery’s global leadership in unscripted and international entertainment and sports.
• Forming a new company that will have significant scale and investment resources with projected 2023 Revenue of approximately US$52 billion, adjusted EBITDA of approximately US$14 billion, and an industry-leading Free Cash Flow conversion rate of approximately 60%.
• Creating at least US$3 billion in expected cost synergies annually for the new company to increase its investment in content and digital innovation, and to scale its global DTC business.
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