US telecoms giant AT&T has announced that its board of directors has determined to spin off its interest in WarnerMedia in connection with its previously announced transaction with Discovery (see below). The deal will spin off 100% of AT&T’s interest in WarnerMedia to AT&T’s existing shareholders in a pro rata distribution; the transaction is expected to close in the second quarter of 2022. The move represents AT&T’s latest attempt to move away from the entertainment sector and focus on the expansion of its 5G and fibre networks.
AT&T CEO John Stankey commented: ‘In evaluating the form of distribution, we were guided by one objective – executing the transaction in the most seamless manner possible to support long-term value generation. We are confident the spin-off achieves that objective because it’s simple, efficient and results in AT&T shareholders owning shares of both companies, each of which will have the ability to drive better returns in a manner consistent with their respective market opportunities.’
As previously reported by CommsUpdate, in May 2021 AT&T 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.