AT&T WarnerMedia Discovery Merger – AT&T Shareholders to own 71% of the New Company

With AT&T’s media business WarnerMedia and Discovery Merger planned to complete next year (mid 2022) as an investor you may have some questions in mind, below I have answered couple of the common ones.

What will be the name of the New Company after the AT&T WarnerMedia Discovery Merger ?

Discovery announced Warner Bros. Discovery will be the new company name after the merger, ticker symbol not known yet

Logo

Warner Bros. Discovery Logo released by Discovery. Source: Discovery.com Investor Relations

Logo’s tagline says “The Stuff that dreams are made of” but looking at the logo it seems it was put together in a rush and we should expect a more polished version or redesign in the future or after the expected merger is completed in 2022.

Transaction Highlights

The combination will be executed through a Reverse Morris Trust, under which WarnerMedia will be spun or split off to AT&T’s shareholders via dividend or through an exchange offer or a combination of both and simultaneously combined with Discovery. The transaction is expected to be tax-free to AT&T and AT&T’s shareholders.

In connection with the spin-off or split-off of WarnerMedia, AT&T will receive $43 billion (subject to adjustment) in a combination of cash, debt securities and WarnerMedia’s retention of certain debt.

When will AT&T WarnerMedia Discovery Merger complete ?

Based on Press release on May 17, 2021, combination of the companies is expected to complete by mid next year 2022.

Why is the merger happening and the sad story behind it ?

Background

AT&T acquired Time Warner in 2017 in hopes of becoming a communications & media giant with a pricey acquisition and indebting an already highly indebted company (as of 7th Aug 21 AT&T is sitting on a debt of $203.87 billion which is more than market cap of $199.63 billion. Today the situation is that in the hopes of becoming a conglomerate AT&T has lost dominance of its core “Communications” business to rival Verizon and competitor’s like T-mobile are eating up the bottom line

Everyone know’s about the pricy acquisition mishaps by AT&T management under the last CEO “Randall Stephenson” with the likes of Time Warner acquisition for $85 billion and directTV for $67 billion which they sold for a loss this year.

Whereas Discovery CEO “David Zaslav” has been good on execution operationally with its legacy TV business but was too late coming with a streaming service “Discovery +”, and as a results stakeholder haven’t experiences any return in Discovery stock in the last five years, as of 7th Aug 21 its stock is trading at $29.04 and five years ago it was around $27 and with no dividend it’s a like putting salt and chillies on investors wounds.

Why the merger ?

Under AT&T WarnerMedia has being neglected and moreover AT&T is struggling with the all the debt so the hopes with the are de-merger are it should allow the media business to lead its own way forward and also allow AT&T to get rid of some of the debt to allow them to focus on their core business and on the other hand Discovery will benefit from the bigger size of the new company and help it compete better in the market.

So, if executed well Warner Bros. Discovery has a really good chance of competing with Disney and Netflix and even winning.

What does the future hold for the new company ?

The question is will WarnerMedia Discovery find its footing now and become the media leader and compete with the likes of Netflix and Disney with its streaming/direct to consumer offerings like HBO Max and Discovery+ after the merger, its a tough question but what’s even more tough is the execution after the merger and begin late in the subscriptions game can really hurt them

But its better to be optimistic if executed well the new company has some great brands and content and is somewhat identical to Disney and a really good shot at succeeding but its all about the management and if they can understand the 21st century consumer wants and deliver that.

Will AT&T cuts its dividend after the merger ?

AT&T will cut its dividend nearly in half and end its 36-year streak

Will the New company pay a dividend ?

Yes the new company is expected to pay a dividend we will post an update once more details are known.

How many shares of the new company will AT&T shareholders own ?

AT&T shareholders will own 71% of shares of the new company where Discovery shareholders will own 29% of the new company.

Quick Links

AT&T’s Press Release on the Merger

Discovery’s Press Release on the Merger

About AT&T Warner Media

WarnerMedia is a Media brand owned by struggling communications giant AT&T (as of today 7th Aug 21 the stock price is $27.96 near its 5 year low).

WarnerMedia has a portfolio of iconic entertainment, news, and sports brands like Warner Bros, Cartoon Network, Pogo, HBO, CNN and more but has struggled to find a rightful owner in last two decades being acquired by a company in some shape or form and then sold again.

Website: warnermedia.com

Investor Relations: investors.att.com

About Discovery

Discovery is a well known TV channel brand across the world and delivers over 8,000 hours of original programming each year and available in over 220 countries and territories and nearly 50 languages. Discovery’s portfolio of brands includes Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, MotorTrend, Animal Planet, Science Channel and others.

Website: discovery.com

Investor Relations: corporate.discovery.com

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Navjot Singh Virk
Navjot is a Hobby Blogger from Ireland and loves to create content to help people. He makes time on weekends to work on this blog. And has a full time position at Yahoo as Technical Product Manager working for Intheknow.com product, which he loves and thrives at. His Skills include in-depth knowledge of SEO, Javascript, Advertising, HTML, Java and Product Management. And his other hobbies include Investing, Gardening and playing Table Tennis.