WarnerMedia, Discovery to merge in blockbuster deal

AT & T’s WarnerMedia and Discovery announced a blockbuster $ 43 billion union on Monday. This is TV’s most famous HBO, CNN, HGTV, Animal Planet, Food Network, and Warner Bros. A combination of movie studios under one roof.

As part of the all-stock transaction, AT & T shareholders will own 71% of the new company and Discovery shareholders will own 29%. AT & T will also receive approximately $ 43 billion in cash, debt securities and other consideration. Both AT & T and Discovery’s boards approved the deal over the weekend.

The proposed media marriage is at the forefront of a cataclysm in the industry as traditional television giants tackle declining reputation, consumer code-cutting, and heightened threats from Netflix, Hulu, Disney + and other streaming services. It’s in the middle.

If approved by investors and regulators, the deal will house DC Comics franchise Harry Potter, Game of Thrones, Cake Boss, and 100 Daydream, with annual revenues of over $ 50 billion. A new company will be born. “Home” and “Pitbull and Palory”.

Discovery’s CEO, David Zaslav, 61, will run the merged company. Veteran executives have been leading Discovery since 2007. He was trained as a lawyer and helped the company go public in 2008. Was the architect of that innovative $ 12 billion purchase 2018 Food Network and HGTV

“In many conversations with John [Stankey, AT&T’s CEO], We always return to the same simple and powerful strategic principles. These assets are better and more valuable together, “Zaslav said in a statement. “It’s very exciting to combine such historic brands, world-class journalism and iconic franchises under one roof to unleash a lot of value and opportunity.”

Zaslav said at a news conference that he would set up an office on Burbank’s historic Warner Bros. grounds.

The spin-off movement represents an important setback for AT & T. Spent $ 85 billion to buy Time Warner 3 years ago Media properties. Former President Trump, a CNN critic, has fought in court with the US Department of Justice for over a year because he wanted to kill the deal. AT & T closed the deal in June 2018 with the approval of the judge.

However, the merger was a difficult vehicle and was characterized by an outflow of executives from almost the beginning.

Today, Dallas telecommunications companies are convinced that their entertainment assets are more valuable to independent companies than to the division within the telephone colossus. AT & T was also motivated to remove some of its $ 180 billion debt from its balance sheet.

“The agreement connects the two entertainment leaders with complementary content strengths and positions the new company as one of the world’s leading consumer streaming platforms,” ​​Stanky said in a statement. I am. “Discovery’s global footprint supports HBO Max’s amazing growth and international launch, creating the efficiency to reinvest in creating better content to deliver what consumers want.”

AT & T wanted a way to connect their subscribers with entertainment services, but at the same time they tried to build a nationwide 5G telephone network and at the same time increased their spending on HBO Max, a streaming service a year ago. , Financially grown.

The proposed deal with Discovery will take place in just three months AT & T said it will spin off another problematic asset, El Segundo-based DirecTV, To an independent company co-owned by TPG Capital. With the twin move, AT & T is doubling its core business: providing consumers with telephone and data services.

WarnerMedia-Discovery contracts are subject to regulatory reviews that may last at least one year. Both companies’ TV channels attract about 30% of cable TV viewers, and both operate early streaming services with a growing subscriber base. The total number of subscribers to HBO and HBO Max is approximately 44 million. Discovery + has approximately 15 million subscribers worldwide.

Both companies also own some of the most popular cable channels such as TBS, TNT, CNN, Cartoon Network, HGTV, OWN and Investigation Discovery.

“The scale is certainly impressive,” Cowen & Co said. Media analyst Doug Kreuz wrote in a research note on Sunday. “But companies have very different cultures and capabilities. This combination looks awkward. Nearly 30 different cable networks are owned in the United States, and more are owned internationally. . “

Discovery has grown its business internationally, especially in Europe. Co-owner of a German streaming service.

Discovery’s chairman is John Malone, a wise investor who is widely recognized as one of the pioneers in the pay-TV business. In 1999 he sold his cable television business to AT & T for $ 55 billion, becoming AT & T’s largest investor, but Malone eventually dissolved his stake and devoted himself to the Liberty Global business. In recent years, Malone, who manages Liberty Global, has spoken frankly about the need for integration, arguing that small, unaffiliated media companies can’t compete with tech giants.

The proposed merger will take place in the face of a surge in entertainment industry integration.

Two years ago, Walt Disney Co. has paid $ 71 billion to buy much of Rupert Murdoch’s entertainment empire... And last year, a stalemate in theme parks, television and film production caused legacy media companies to fire thousands of workers in the COVID-19 pandemic. WarnerMedia alone has reduced about 2,000 positions.

“The merger will cause a lot of internal stress, given the potential for severance, especially in WarnerMedia, which has already undergone several rounds of cataclysms since the acquisition of AT & T,” analyst Kreuz said. Stated.

Earlier this month, AT & T competitors Verizon announced that it is selling most of its media assets$ 5 billion including Yahoo and AOL. The telecommunications market is fiercely competitive, and T-Mobile is profiting from 5G phone services, challenging two long-time leaders, Verizon and AT & T.

WarnerMedia, Discovery to merge in blockbuster deal Source link WarnerMedia, Discovery to merge in blockbuster deal

Related Articles

Back to top button