AT&T and Discovery Combine Their Media Assets
AT&T Retreats From Entertainment
AT&T (T) and Discovery (DISCB) are combining their media assets in a $43 billion deal to create a new stand-alone public company. AT&T has recently been taking a number of steps to exit the entertainment industry. Earlier this year AT&T sold a 30% stake in DirectTV to the private equity firm TPG for $1.8 billion.
The new company, which AT&T and Discovery have not yet named, will be headed by David Zaslav, the current CEO of Discovery. It will hold around $55 billion in debt. AT&T shareholders will own 71% of the new company and Discovery shareholders will have a 29% ownership stake. AT&T will receive a combination of cash, debt, and stock when the deal closes.
More Competition Coming
Talks to combine AT&T’s Warner Media with Discovery have been ongoing for several months. The new company will be designed to take on streaming services including Netflix (NFLX), Amazon (AMZN), Disney+ (DIS), and Apple (AAPL). Combined, AT&T and Discovery spend $20 billion on content, which is higher than what Netflix spends.
It is not clear what the new company’s plans are for HBO Max and Discovery+, their standalone streaming services. They could remain separate or be combined to create a larger library of content.
A Smaller AT&T
AT&T plans to reduce its dividend to reflect its smaller size. The total annual payout will be between $8 billion and $8.6 billion, which is about half of what investors received in prior years. The deal will also reduce AT&T’s debt, which was $169 billion as of March.
The sale of the Warner Media assets unwinds AT&T’s $81 billion acquisition of Time Warner which occurred in 2018. Back then the US Justice Department was worried the combined company would harm competition in the pay-TV market. Even three years ago, analysts did not predict what a significant impact the internet would have on pay-TV, and that streaming would hurt pay-TV more than a combined AT&T and Time Warner. The media industry will be keeping a close watch on the deal as it unfolds.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS21051802
All your finances.
All in one app.
App Store rating
