AT&T to spin off WarnerMedia in $43bn media merger with Discovery

1 Feb 2022

Image: © Ascannio/Stock.adobe.com

The deal is expected to close later this year, creating a new contender in the competitive streaming market.

AT&T has confirmed plans to spin off WarnerMedia in a $43bn transaction to merge its media properties with Discovery Inc.

As part of the deal first announced last year, AT&T shareholders will own 71pc of the new Warner Bros Discovery company. Existing Discovery shareholders will own approximately 29pc of the new company.

Future Human

AT&T’s properties under the WarnerMedia umbrella include CNN, HBO, Warner Bros and several other TV stations, while Discovery owns its eponymous TV network, along with Animal Planet, TLC and a host of other names.

The new combined company could become a massive player in the streaming market, bringing together two portfolios of content across TV, movies and news.

AT&T acquired Time Warner in 2018 for $85bn, a deal that placed the company in significant debt.

AT&T CEO John Stankey said the US telecoms company is confident the decision to spin off WarnerMedia will support long-term value generation.

“Rather than try to account for market volatility in the near-term and decide where to apportion value in the process of doing an exchange of shares, the spin-off distribution will let the market do what markets do best,” Stankey said. “We are confident both equities will soon be valued on the solid fundamentals and attractive prospects they represent.”

AT&T said its board approved an annual dividend of $1.11 a share, down from $2.08, to account for the spin-off. The telecoms company expects to use the $43bn to focus on its 5G and fibre broadband networks in the US.

The deal is expected to close in the second quarter of this year. Once created, Warner Bros Discovery will likely be looking to take a share of the highly competitive streaming market.

HBO Max, the WarnerMedia streaming service, is a much smaller player in the streaming landscape, ending 2021 with more than 73m subscribers.

Last August, Disney+ beat expectations and narrowed the gap between itself and Netflix, reaching 116m subscribers worldwide.

While Netflix remains the top contender in the streaming industry with more than 220m subscribers, it has experienced a slowdown in subscriber additions and gave a weak forecast for the first quarter of 2022.

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Leigh Mc Gowran is a journalist with Silicon Republic

editorial@siliconrepublic.com