US telecommunications giant AT&T announced a deal on Monday combining its content unit WarnerMedia with Discovery to pave the way for one of Hollywood’s largest studios to compete with rival media giants Netflix and Disney.
Under the terms of the agreement, AT&T announced that it would receive a total of $ 43 billion in a combination of cash, debt and WarnerMedia’s withholding of certain debts.
AT&T shareholders would receive shares representing 71% of the new company, while Discovery shareholders would own 29%, he added.
According to reports over the weekend, the companies were in advanced talks to complete the merger.
If approved by regulators, it will effectively reverse AT & T’s longstanding plan to combine content and distribution into one vertically integrated company.
The deal would create a new business separate from AT&T that could be worth up to $ 150 billion including debt, according to The Financial Times.
The shares of US media company Discovery rose 14% in pre-market trading, while AT & T’s share price rose around 5%.
“This agreement brings together two leading entertainment companies with complementary strengths in terms of content and positions the new company as one of the world’s leading streaming platforms for direct consumers,” said John Stankey, CEO of AT&T, in a statement.
“AT&T shareholders will retain their stake in our leading communications company, which offers an attractive dividend. They will also receive stake in the new company, a global media leader capable of building one of the best streaming platforms in the world,” he said added.
Leadership and governance
AT&T said David Zaslav, President and CEO of Discovery, will lead the new company. The board of directors would consist of 13 members, seven of whom were originally appointed by AT&T including the chairman of the board of directors, and Discovery would appoint six members including Zaslav.
“It’s super exciting to bring such historic brands, world-class journalism and cult franchises under one roof and unlock so much value and opportunity,” said Zaslav, adding that the assets of AT&T and Discovery “do better together.” and are more valuable “.
The unique mission of the new company, said Zaslav, is “to focus on telling the most amazing stories and have a lot of fun doing it”.
David Zaslav, President and CEO of Discovery Communications, and Richard Plepler, Chairman and CEO of HBO, speak on stage during “Who Owns Your Screen?” at the Vanity Fair New Establishment Summit at the Yerba Buena Center for the Arts on October 9, 2014 in San Francisco, California.
Michael Kovac | Getty Images
AT&T owns CNN, HBO, and Warner Bros. after acquiring Time Warner, since renamed WarnerMedia, for $ 109 billion in 2018. Discovery channels include Animal Planet and the Discovery Channel.
According to reports, WarnerMedia’s HBO and HBO Max have around 64 million subscribers worldwide. Discovery announced last month that it had reached 15 million paying subscribers.
In contrast, Netflix currently has around 208 million subscribers worldwide, while Disney + recently topped 100 million less than a year and a half after the streaming service launched.
– CNBC’s Alex Sherman contributed to this report.