US telecommunications giant AT&T announced a deal on Monday combining its content unit WarnerMedia with Discovery to pave the way for one of Hollywood’s largest studios to compete with rivals such as media giants Netflix and Disney.
As part of the agreement, AT&T will handle the $ 85 billion acquisition of Time Warner, which was completed almost three years ago, and will found a new media company, Discovery. The deal would create a new business separate from AT&T that could be worth up to $ 150 billion including debt, according to The Financial Times.
AT&T said it would receive a total of $ 43 billion in a combination of cash, debt, and WarnerMedia’s withholding of certain debts. AT&T shareholders would receive shares representing 71% of the new company, while Discovery shareholders would own 29%, he added.
If approved by regulators, it will effectively reverse AT & T’s longstanding plan to combine content and distribution into one vertically integrated company. The companies said the deal is expected to close in mid-2022.
Discovery’s shares rose nearly 10% in premarket trading, while AT & T’s share price rose more than 2%.
AT&T said David Zaslav, President and CEO of Discovery, will lead the new company. The board would consist of 13 members, seven of whom were originally appointed by AT&T including the chairman, and Discovery would appoint six members, including Zaslav.
“It’s super exciting to bring such historic brands, world-class journalism and cult franchises under one roof and unlock so much value and opportunity,” said Zaslav, adding that the assets of AT&T and Discovery “do better together.” and are more valuable “.
The unique mission of the new company, said Zaslav, is “to focus on telling the most amazing stories and have a lot of fun doing it”.
However, the future of current WarnerMedia CEO Jason Kilar is uncertain. At a press briefing on Monday morning after the announcement, Stankey said Kilar still had his title but it was up to Zaslav to decide whether Kilar still had a job at the new company.
David Zaslav, President and CEO of Discovery Communications, and Richard Plepler, Chairman and CEO of HBO, speak on stage during “Who Owns Your Screen?” at the Vanity Fair New Establishment Summit at the Yerba Buena Center for the Arts on October 9, 2014 in San Francisco, California.
Michael Kovac | Getty Images
AT&T owns CNN, HBO and Warner Bros. after acquiring Time Warner, since renamed WarnerMedia. Discovery channels include Animal Planet, TLC, and the Discovery Channel.
Zaslav said in Monday’s press conference that he believes the combined company can stand out from top streaming services like Disney + and Netflix by adding a combination of news in addition to entertainment like Game of Thrones and Harry Potter and sports.
Stankey and Zaslav said the two companies together already spend $ 20 billion a year on content, which puts them in the same space as Netflix, which currently spends about $ 17 billion on content a year.
Zaslav did not provide specific details on what the new combined company’s streaming offering will be, but said there will be a lot of flexibility. HBO Max is preparing to roll out a cheaper, ad-supported version of its service in the coming weeks. And Discovery +, which launched earlier this year, also offers an ad-supported version.
“We will do it differently,” said Zaslav at the press conference on Monday. “We will have the flexibility here in the US and around the world to determine how we create the ecosystem around this extraordinary intellectual property. We will see what consumers want and how they want it over the next few years.” “”
HBO and HBO Max reportedly have around 64 million subscribers worldwide. Discovery announced last month that it had reached 15 million paying subscribers.
In contrast, Netflix has around 208 million subscribers worldwide, while Disney + recently topped 100 million less than 1½ years after the streaming service launched.
The announcement came after reports over the weekend that the companies were in advanced talks to complete the merger.
This story evolves. Update for updates.
– CNBC’s Alex Sherman contributed to this report.