In the face of cord cuts and incursions from streaming services, major broadcast media companies have folded and sought to strengthen themselves through mergers. The deal announced on Monday would create a separate media company, with households increasingly moving away from cable and satellite TV, turning to Netflix, Amazon Prime Video, Facebook, TikTok and YouTube instead.
As part of the all-equity transaction, AT&T will receive US $ 43 billion in cash, debt securities and certain debt retention from WarnerMedia. AT&T shareholders will receive shares representing 71% of the new company and Discovery shareholders will own 29% of the new company.
AT&T had entered the streaming business through HBO Max, a direct competitor of Netflix, Apple, Disney and Comcast. Discovery this year launched a standalone streaming service called Discovery Plus.
Agreement to abandon media activity marks a major shift from AT&T, which fought hard to complete a deal in 2018 to buy Time Warner for US $ 85.4 billion. , with the Justice Department attempting to block the deal on anti-competitive grounds.
The deal is expected to be concluded by the middle of next year.