AT&T Announces Deal To Merge WarnerMedia With Discovery To Create New Streaming Giant

AT&T spent USD 85 billion three years ago to purchase Time Warner. The deal turned the US telecom giant into one of the world’s biggest media houses. WarnerMedia has been growing ever since. The success of HBO Max helped it to thrive even better. It must be noted that AT&T owns CNN, HBO, and Warner Bros as it spent USD 108 billion in the acquisition in 2018. But AT&T is apparently regretting its decision. This is because the company is in deep debt. In a bid to reduce the burden of debt, the telecommunication company has decided to spun off the WarnerMedia division and merge it with rival Discovery to create a new streaming giant. This will help the company to compete with rivals like Disney and Netflix. They have a considerable presence in the area of streaming services.

According to AT&T, it would receive around USD 43 billion. This will be in combination with cash, debt, and retention of certain debt of WarnerMedia. Under the agreement, shareholders of AT&T would own 71 percent of stocks and Discovery would get the remaining 29 percent. The final deal is expected to be announced as early as within a week. Once announced, the deal would need approval from regulators. Once done, this would be a reversal of the telecommunication giant’s plan to club distribution and content in a vertically integrated company. But the deal would create an entirely separate company, separate from AT&T. The new streaming company could be valued at around USD 150 billion, including debt.

AT&T CEO John Stankey said that the deal would bring together two of the biggest entertainment leaders. “This will unite two of the biggest leaders of the entertainment industry. The good part is that they will have added strengths of content. This will help the new company to become one of the biggest global direct-to-consumer streaming platforms. Shareholders of AT&T will continue to retain their stakes in the company and will also get some stakes in the new company,” Stankey said in a statement. According to AT&T, the new company will be headed by Discovery President and CEO David Zaslav. Initially, there will be 13 board members. Out of them, seven – including the chairman – will be appointed by AT&T. Remaining six members, including Zaslav, would be chosen by Discovery. Commenting on the announcement, Zaslav said that he is excited about the deal that would combine such historic brands.