AT&T spins off WarnerMedia via USD43bn Discovery deal

18 May 2021

US telecoms giant AT&T has announced a definitive agreement to combine WarnerMedia’s entertainment, sports and news assets with Discovery’s non-fiction and international entertainment and sports businesses to create what they describe as ‘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 will receive USD43 billion (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt. AT&T’s shareholders will receive stock representing 71% of the new company, while Discovery shareholders will own 29% of the new company. The Boards of Directors of both AT&T and Discovery have approved the transaction.

AT&T CEO John Stankey commented: ‘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 … For AT&T shareholders, this is an opportunity to unlock value and be one of the best capitalised broadband companies, focused on investing in 5G and fibre to meet substantial, long-term demand for connectivity.’

According to TeleGeography’s GlobalComms Database, in October 2016 AT&T diversified its traditional telecoms-focused strategy, when it agreed to pay USD85 billion for media and entertainment conglomerate Time Warner Inc. The tie-up combined Time Warner’s vast library of content – it owned HBO, Warner Bros and Turner – with AT&T’s extensive customer base. After a lengthy review period, the merger was completed in June 2018, prompting appeals from the Department of Justice (DoJ).

United States, AT&T