AT&T is planning to spin off WarnerMedia in a $43 billion merger deal with competitor Discovery in a move that will create a TV, film and streaming powerhouse, according to AT&T and media reports on Monday (May 17).
AT&T’s shareholders will get a 71 percent stake in the combined entity and Discovery shareholders will get 29 percent. The new company has projected 2023 revenues of approximately $52 billion, adjusted EBITDA of approximately $14 billion, and a free cash flow conversion rate of approximately 60 percent, according to the AT&T press release.
The transaction will combine WarnerMedia’s content library of sports, news and family entertainment, with Discovery’s trove of local-language content and regional expertise from more than 200 countries. Content plans for the new company include an expanded library of original shows, enhanced programming options, and innovative video experiences and consumer choices.
AT&T CEO John Stankey said WarnerMedia and Discovery have “complementary content strengths” and the merger makes the new entity in a position of being among “leading global direct-to-consumer streaming platforms.”
“AT&T shareholders will retain their stake in our leading communications company that comes with an attractive dividend. Plus, they will get a stake in the new company, a global media leader that can build one of the top streaming platforms in the world,” Stankey added.
The companies said the deal is expected to close in the middle of 2022. WarnerMedia includes Warner Bros film and television studios, HBO and a suite of cable channels including CNN. Aside from local-language content, Discovery also has a menu of DIY programming, animal shows and lifestyle content.
AT&T acquired Time Warner in 2018 for $85 billion. AT&T recently uploaded numerous assets and has been earmarking funds for 5G development.
In 2015, 24 percent of Americans didn’t have cable television or satellite, according to Pew Research. This year, 44 percent don’t have either. That’s a drop of almost a 50 percent in six years.