Telecommunications giant AT&T recently announced that it will trim away its WarnerMedia assets and combine it with Discovery, Inc to create a new standalone media company much to the delight of Hollywood.
As a result, AT&T’s shares went up 5% in the morning of May 17th, but then when down and closed at 1.4%. Discovery, Inc saw a similar rise then fall at the company closed down 5.1%.
Big Money Deal
In this new deal, AT&T will receive $43 billion in both cash and debt, and its shares holders will own 71% of the new company with Discovery shareholders holding the final 29%. The still-unnamed company is slated to be a powerhouse in the entertainment industry as it would have the likes of HBO, CNN, TNT, TBS, the Food Network, and even Warner Bros. underneath it.
The new company is predicted to generate $52 billion in yearly revenue and $14 billion before taxes, interest, and more by 2023.
Streamlining the Process
The new company will be led by Discovery, Inc President and CEO David Zaslav and various executives from AT&T and Discovery. As for what the two companies will get, AT&T will be able to pay down its debt and prioritize its broadband business-like investing in 5G and fiber-optic network, and Discovery, Inc will be allowed to accelerate its streaming initiatives.
Zaslav said in a press release “…we believe everyone wins… consumer with more diverse choices, talent and storytellers with more resources…, and shareholders with a globally scaled growth company committed to a strong balance sheet…”
Sigh of Relief
Producers and studios were happy to hear that AT&T was abdicating WarnerMedia from its holdings due to how difficult it has been to work with the telecommunications giant. After the acquisition of Time Warner back in 2018, workers got hit with labor cuts and studio heads often clashed with AT&T.
— Discovery Inc (@DiscoveryIncTV) May 17, 2021
Many top-level officials are happy with Zaslav as the choice and remain optimistic as Imax CEO Rich Gelfond said in an interview “[Zaslav] really has a human touch and he really understands how business gets done and how it works and that it’s more than algorithms.”
This hasn’t been the only instance of AT&T shedding off excess companies as earlier in the year did the same thing as it spins off DirecTV, AT&T TV Now, and U-verse into their own company. AT&T has joint control of this control along with TPG Capital and is valued at $16.25 billion.
In the previous decade, AT&T attempted to combine media content with its distribution prowess into an entertainment powerhouse, but this deal had its wings clipped thanks to the advent of Netflix and other streaming services.
Now in an attempt to recuperate some losses, AT&T has taken to sell off the companies it gobbled up; however big a loss it may be. As mentioned briefly earlier, AT&T will now take the time to invest and expand its 5G network and its fiber-optic network. Hopefully, this means better internet for all.