WarnerMedia and Discovery merge to create a new global leader in entertainment

In yet another major consolidation of two global media giants, AT&T and Discovery have announced a definitive agreement to combine WarnerMedia’s premium entertainment, sports and news assets with Discovery's leading nonfiction and international entertainment and sports businesses to create a premier, standalone global entertainment company.

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About three and a half years ago, Walt Disney had acquired 21st Century Fox for $52.4 bn.

The two companies will be combining their media assets, WarnerMedia and Discovery, to create a new streaming-centric media company. This will join the WarnerMedia division—which includes Warner Bros., HBO, TNT, TBS, CNN, Cartoon Network and HBO Max—with Discovery’s portfolio—which includes Discovery, HGTV, TLC, ID, Food Network, OWN, the upcoming Magnolia Network and Discovery+.

In the deal, AT&T will receive $43 billion cash and debt securities, and WarnerMedia will be spun off and combined with Discovery, in an all-stock move referred to as a Reverse Morris transaction. The transaction is expected to close in mid-2022.

AT&T’s shareholders would receive stock representing 71% of the new company; Discovery shareholders would own 29% of the new company. The Boards of Directors of both AT&T and Discovery have approved the transaction.

The name for the new company will be unveiled later this week or next week.

Discovery president and CEO David Zaslav will lead the new company, and executives from both companies will have key leadership roles.

In a press call, AT&T CEO John Stankey said that Jason Kilar will remain CEO of WarnerMedia, and it will be up to Zaslav to determine his leadership time for the new company.

The new company’s Board of Directors will consist of 13 members, 7 initially appointed by AT&T, including the chairperson of the board; Discovery will initially appoint 6 members, including CEO Zaslav.

“This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms. It will support the fantastic growth and international launch of HBO Max with Discovery’s global footprint and create efficiencies which can be re-invested in producing more great content to give consumers what they want. For AT&T shareholders, this is an opportunity to unlock value and be one of the best capitalized broadband companies, focused on investing in 5G and fiber to meet substantial, long-term demand for connectivity. 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 said in a press statement.

Zaslav said, "During my many conversations with John, we always come back to the same simple and powerful strategic principle: these assets are better and more valuable together. It is super exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity. With a library of cherished IP, dynamite management teams and global expertise in every market in the world, we believe everyone wins...consumers with more diverse choices, talent and storytellers with more resources and compelling pathways to larger audiences, and shareholders with a globally scaled growth company committed to a strong balance sheet that is better positioned to compete with the world’s largest streamers. We will build a new chapter together with the creative and talented WarnerMedia team and these incredible assets built on a nearly 100-year legacy of the most wonderful storytelling in the world. That will be our singular mission: to focus on telling the most amazing stories and have a ton of fun doing it.”

A stronger competitor in global streaming

The new company will compete globally in the fast-growing direct-to-consumer business -- bringing compelling content to DTC subscribers across its portfolio, including HBO Max and the recently launched discovery+. The transaction will combine WarnerMedia’s storied content library of popular and valuable IP with Discovery’s global footprint, trove of local-language content and deep regional expertise across more than 200 countries and territories. 

The new company will be able to invest in more original content for its streaming services, enhance the programming options across its global linear pay TV and broadcast channels, and offer more innovative video experiences and consumer choices.

Uniting iconic brands and franchises

The “pure play” content company will own one of the deepest libraries in the world with nearly 200,000 hours of iconic programming and will bring together over 100 of the most cherished, popular and trusted brands in the world under one global portfolio, including: HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, the Turner Networks, TNT, TBS, Eurosport, Magnolia, TLC, Animal Planet, ID and many more.

The new company will be able to increase investment and capabilities in original content and programming; create more opportunity for under-represented storytellers and independent creators; serve customers with innovative video experiences and points of engagement; and propel more investment in high-quality, family-friendly nonfiction content.

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