AT&T and Discovery Combine Entertainment Units

AT&T will combine its WarnerMedia unit with pay-TV broadcaster Discovery. Companies claim that the deal will create a global leader in entertainment.

The companies jointly stated the deal involves combining WarnerMedia’s premium entertainment, sports and news assets with similar Discovery businesses to create a standalone company. They said that this new business will offer the most differentiated content portfolio in the world.

AT&T will receive $43 billion comprised of cash, debt securities and WarnerMedia’s retention of certain debt, while the operator’s shareholders receive stock representing 71 percent of the new company. Discovery shareholders will hold the remainder. The boards of both companies approved the move.

Companies expect to accelerate plans to lead the direct-to-consumer streaming sector globally through combining leadership teams and content creators to deliver diverse programming. It will create a new rival to content giants Netflix and Disney by bringing together more than 100 brands such as HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, Food Network, the Turner Networks, Eurosport and Animal Planet. A name for the new entity will be unveiled within the next week.

The new company is projected to bring in revenue of approximately $52 billion in 2023. There is also an expectation of at least $3 billion in cost synergies annually. AT&T added the deal was designed to unlock media assets, capitalise on streaming trends and position it as the best capitalised 5G and fibre broadband company in the US.

The deal is expected to close in mid-2022, subject to approval from Discovery shareholders and customary closing conditions. No vote is required by AT&T shareholders.