The deal will combine two “treasure troves of content,” such as HBO Max, CNN, and Discovery+, among others.
What We Know:
- On Monday morning, AT&T and Discovery Inc. announced they would merge to create a standalone media company. Discovery Chief Executive Officer (CEO) David Zaslav will spearhead the new venture, and new AT&T CEO John Stankey will hold a “key leadership role.”
“I think we fit together like a glove,” Zaslav boasted at a virtual press conference.
- The spin-off will allow AT&T to prioritize its broadband business and reduce its debt. AT&T would receive $43 billion (subject to adjustment) from cash, debt securities, and WarnerMedia’s debt retention. In addition, Zaslav reported the new company would start with $55 billion in debt.
- CNN writes the news is seen as AT&T surrendering after attempting to combine content and distribution. The company wanted to create a streaming service to compete with Netflix and Disney+. They also declared that earlier this year, the company struck a deal to fix DirecTV at a significant loss from 2015’s purchase price. At Monday’s virtual press conference, AT&T confirmed they would exit the business industry.
“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,” said Stankey.
- The arrangement came together after Zaslav sent Stankey an email on February 13. The two men began a conversation about the future of media and eventually started meeting in person to negotiate the deal’s terms. Discovery, Inc. and AT&T board members agreed to the merger this weekend.
- Under the contract’s agreement, AT&T shareholders will obtain $43 billion in cash, debt securities, and debt retention. They will additionally gain a 71% stake in the new establishment. Discovery investors will keep the remaining 29%.
- After the deal closes in 2022, the new company will be second only to Disney. Discovery expects estimated revenues of $52 billion and adjusted earnings before interest, tax, depreciation, and amortization of $14 billion in 2023 for the streaming device. Furthermore, it will have an enterprise value of around $132 billion, including the aforementioned debt and expected annual synergies of approximately $3 billion.
Zaslav mentioned the streaming service, whose name is to be released in the next week, will prioritize storytelling, journalism, and creative talent.
