AT&T has struck a deal to combine its WarnerMedia business with Discovery, with the aim of creating one of the largest global streaming players.
The deal will bring together WarnerMedia’s entertainment, sports and news assets with Discovery’s factual and international entertainment and sports businesses to create a content company with an estimated 200,000 hours of programming and a pledge to invest more in original content.
The new company’s portfolio will include streaming services HBO Max and discovery+, with host of well-known brands including HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, Food Network, the Turner Networks, Eurosport, and TLC.
Discovery president and CEO David Zaslav will lead the new outfit.
He said: “During my many conversations with John [AT&T CEO John Stankey], we always come back to the same simple and powerful strategic principle: these assets are better and more valuable together.”
For AT&T, the deal will result in $43 billion in a combination of cash and debt, plus a 71% stake in the new company which has projected revenue in 2023 of approximately $52 billion. AT&T said the deal would lead to at least $3 billion in annual cost savings.
AT&T will now focus on connectivity. Chief executive John Stankey said: “[This agreement] 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.”
The transaction is expected to close in mid-2022, subject to approval by regulators and Discovery shareholders.