Discovery and WarnerMedia merge, creating one of the largest U.S. media companies
AT&T's move to spin off WarnerMedia and combine it with Discovery comes as Netflix and Disney have shown the upside of direct-to-consumer streaming platforms.
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AT&T announced on Monday that WarnerMedia and Discovery are merging to become a new company that will immediately become one of the largest U.S. media businesses.
The new company is the result of AT&T spinning off WarnerMedia, which owns a variety of major media properties including CNN, TBS, TNT, Warner Bros. film and television studio and HBO, into a new company. That company is merging with Discovery, which owns Discovery Channel, Animal Planet, TLC, the Food Network and various other media properties.
AT&T will receive $43 billion worth of cash, debt securities and WarnerMedia's retention of debt. The new company will be led by Discovery CEO David Zaslav.
It's a major deal that allows AT&T to undo one of the largest media acquisitions in history: the 2016 purchase of Time Warner for $109 billion. AT&T billed the deal as a chance to combine its telecommunications business, consumer data and media offerings in a way that could compete with major media and tech companies.
The move to spin off Time Warner, later named WarnerMedia, and combine it with Discovery comes as Netflix and Disney have emerged as the dominant players in the direct-to-consumer streaming market.
In its press release, AT&T said that the new company will be better positioned to compete in the increasingly important streaming world.
"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," AT&T CEO John Stankey said in the press release. "It will support the fantastic growth and international launch of HBO Max with Discovery’s global footprint and create efficiencies which can be re-invested in producing more great content to give consumers what they want."
AT&T shareholders will own 71 percent of the new company, with Discovery shareholders getting 29 percent, according to an AT&T press release. The deal also allows AT&T to unload some of its debt, which had become the focus of analyst concern on Wall Street.
Stankey said the deal would help AT&T refocus.
