AT&T to merge media and entertainment division with Discovery Inc., forming streaming behemoth

[BumRushDaShow]

Source: Washington Post

AT&T announced Monday that it plans to combine its entertainment and media company with Discovery Inc. in a deal that would create a TV, film and streaming behemoth featuring more than a half dozen top cable networks plus Warner Bros. studio and other properties. If approved by federal regulators, the deal would create a top new competitor in the entertainment spectrum three years following AT&’s blockbuster purchase of Time Warner that provided the telecom giant with CNN, HBO, Cartoon Network, TBS, TNT and the Warner Bros. studio.

The new company would combine with Discovery, which was founded as a documentary company in the Maryland suburbs in the 1980s but has grown to be the New York-based parent of networks including Animal Planet, Food Network, HGTV and the Travel Channel.Public interest groups, consumer advocates and President Trump’s Justice Department opposed AT&T’s Time Warner acquisition. The deal gave AT&T, which controls of much of the infrastructure bringing television and steaming services into American homes and smartphones, a premier entertainment company in WarnerMedia, one that owns top titles such as Game of Thrones and the Harry Potter movie franchise.

A federal judge and then an appeals court allowed the deal to go forward. That acquisition came on the heels of AT&T’s $67 billion purchase of DirecTV in 2015. AT&T sold off about one-third of its DirecTV stake earlier this year. But the spinoff is a sign that marshalling such disparate assets has not rendered the benefits AT&T hoped, and that executives believe a separate company would be better equipped to compete with the other major players in the streaming wars that are increasingly replacing cable as a source of entertainment.

Tops among those competitors are Netflix and Disney, which acquired 21st Century Fox in 2019. Netflix, valued at $219 billion, has approximately 208 million subscribers worldwide. Disney, worth $315 billion, has 100 million subscribers to its Disney+ service.

Read more: https://www.washingtonpost.com/business/2021/05/17/att-discovery-hbo-cnn/

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Full headline: AT&T to merge media and entertainment division with Discovery Inc., forming streaming behemoth that includes HBO and CNN

[Auggie]

1. I loathe AT&T and will never trust it. However, I have to hand it to them ...

they are relentless acquirers and have so far seemed to make all the "right*" moves.

*"Right" for investors, not consumers.

[Sherman A1]

4. I own some AT&T stock and I'm not impressed

At all. To me the management is a bunch of losers who cannot figure out just what business they are in or want to be in.

[Auggie]

5. Thanks for posting. I was wrong.

Didn't realize the debt burden from the 2018 TimeWarner acquisition weighed so heavily on earnings. Duh.

More from Barron's:

AT&T began the day with a bold announcement and cheers from investors. The stock jumped on news that the company would be spinning off its WarnerMedia assets, combining them with Discovery, leaving AT&T a more concentrated bet on the future of communications. But by Monday afternoon, investors had second thoughts.

AT&T (ticker: T) shares were up as much as 5% Monday morning to a 52-week high before giving back the gains to close down 1.4%. Shares of Discovery (DISCA) reversed an even larger rise and closed down 5.1% Monday.

AT&’s surprising decision Monday to unwind its media efforts will have broad ramifications for the telecom and content world. For investors, the move will give them distinct ways to play two of the hottest trends in technology: the rollout of 5G and direct-to-consumer streaming.

SNIP

AT&T shareholders will own 71% of the new company and Discovery shareholders will keep the remaining 29%. AT&T will ultimately reduce its net debt by $43 billion at closing. The all-stock deal will be structured as a Reverse Morris Trust, which means it will be a tax-free transaction in which WarnerMedia is first spun off from AT&T and then combined with Discovery.

MORE: https://www.barrons.com/articles/att-telecom-company-what-means-stock-5g-streaming-51621273800

Analysis of winners and loser by Barron's here: https://www.barrons.com/articles/here-are-the-winners-and-losers-of-the-at-t-warnermedia-discovery-mega-deal-51621280105

[Sherman A1]

6. I checked this morning and the stock is

Dropping like a stunned falcon. I bought it as an established company with a decent dividend that should do nothing but grow as demand for communications increases and gotta say they appear to be the gang that can’t shoot straight.

[GB_RN]

2. The Courts Screwed Up

Allowing that merger. No ifs ands or buts about it. Way too much centralization and power in the hands of AT&T. Apparently, too many people have forgotten why the “Death Star” was broken up to begin with.

[Pinback]

3. Oh, great! So customers can look forward to lower prices

due to increased efficiency.



Haha, just kidding of course!