WarnerMedia finalizing details of Discovery merger
By Matt Collins Article may include affiliate links
The transaction is expected ring in at a value of $43 billion and will “spin off” the WarnerMedia division of AT&T into Discovery.
Executives had contemplated using a “split off” instead of spinoff to create the new combined company, which would have given shareholders the option to swap AT&T shares for ones in the new venture.
However, the spinoff approach was likely more appealing because it’s tax free.
AT&T shareholders will receive 71% of the new company, to be called Warner Bros. Discovery, with them receive 0.24 shares of the combined venture.
AT&T is also expected to pay a dividend of $1.111 per share, which is toward the lower end of the range totaling $8 billon to $9 billion in total that was expected.
AT&T is spinning off the WarnerMedia division it created when it acquired the second iteration of TimeWarner in 2018. This included, among other assets, Warner Bros. and Turner Broadcasting.
Inside of those divisions are big names in media including CNN, HBO, Cartoon Network, TBS, a share in The CW and the iconic Warner Bros. studios.
After the acquisition, AT&T opted to rename the company was WarnerMedia.
At the time, AT&T had hoped that blending the TimeWarner properties with its telecom, broadband and pay TV services would create a media conglomerate that could benefit from both having control of content creation and getting it into people’s homes.
In that way, it was similar to Verizon’s purchase of Yahoo! that included a slew of digital media properties.
Neither of the synergies envisioned in those mergers ever really ended up working out, with Yahoo! and, now, WarnerMedia being sold off by their telecom parents.
Combined with Discovery, Warner Bros. Discovery will control a large portfolio of media properties, including lifestyle brands HGTV, Food Network and Discovery Channel, as well as news, sports, entertainment and information properties from WarnerMedia.
These include linear television offerings delivered primarily via cable and satellite as well as digital platforms.
The two companies will also operate three distinct streaming services between them come later in 2022 with CNN+ launches, joining the existing HBO Max and Discovery+.
Ultimately, the combined company could chose to consolidate its streaming offerings or bundle them, similar to how Disney does with Disney+, Hulu and ESPN+.
This strategy lets the company sell individual, lower cost subscriptions for individuals mostly interested in a single type of content, such as the mostly family friendly fare on Disney+ or combine the offerings for those looking for a more complete package.