WarnerMedia, Discovery Move To Create Standalone Stand-Out


It was first reported early Monday, European time, by several business media outlets, with an announcement due no later than 12:30pm in London.

Like clockwork, the official word came from Dallas and from New York: Another blockbuster media merger had been consummated. Only this time, it involves two major players in a rapidly evolving MVPD arena seeking to remain as relevant in the connected TV world as it has been in the cable universe.

WarnerMedia and Discovery are merging.

To make this happen, WarnerMedia parent AT&T and Discovery Inc. will combine its entertainment, sports and news assets that include such brands as CNN, Home Box Office (HBO), TNT and TBS with Discovery’s array of channels, which include Animal Planet, HGTV, Food Network, TLC and ID.

The deal is also significant as Discovery on January 4 rolled out its discovery+ OTT platform, which has been heavily promoted across spot cable since its launch, Media Monitors data show.

For those who closely followed the merger acquisition of the former CBS Radio by Audacy, then known as Entercom Communications, terms of the Discovery/WarnerMedia deal are structured similarly in that a new entity is being created through a Reverse Morris Trust transaction.

Thus, AT&T will spin off WarnerMedia, and this will immediately enter into a merger upon closing with Discovery through an all-stock transaction that is tax free.

AT&T would receive $43 billion — subject to adjustment — in a combination of cash, debt securities, and WarnerMedia’s retention of some debt. For AT&T shareholders, they’ll receive stock representing 71% of the new company; Discovery shareholders would own 29% of the new company.

The Boards of Directors of both AT&T and Discovery have approved the transaction. The transaction is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals.

No vote is required by AT&T shareholders.

The new company expects to maintain investment grade rating and utilize the significant cash flow of the combined company to rapidly de-lever to approximately 3.0x within 24 months, and to target a new, longer term gross leverage target of 2.5x-3.0x,” the companies said in a joint announcement. “WarnerMedia has secured fully committed financing from JPMorgan Chase Bank, N.A. and affiliates of Goldman Sachs & Co. LLC for the purposes of funding the distribution.”

For AT&T and its shareholders, the company believes “this transaction provides an opportunity to unlock value in its media assets and to better position the media business to take advantage of the attractive DTC trends in the industry. Additionally, the transaction allows the company to better capitalize on the longer-term demand for connectivity.”


David Zaslav
David Zaslav

Discovery President/CEO David Zaslav will lead the proposed new company.

Discovery’s current multiple classes of shares will be consolidated to a single class with one vote per share.

The new company’s Board of Directors will consist of 13 members, 7 initially appointed by AT&T, including the chairperson of the board; Discovery will initially appoint 6 members, including Zaslav.

Commenting on the merger, Zaslav said, “During my many conversations with [AT&T CEO] John Stankey, we always come back to the same simple and powerful strategic principle:  these assets are better and more valuable together.  It is super exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity.  With a library of cherished IP, dynamite management teams and global expertise in every market in the world, we believe everyone wins … consumers with more diverse choices, talent and storytellers with more resources and compelling pathways to larger audiences, and shareholders with a globally scaled growth company committed to a strong balance sheet that is better positioned to compete with the world’s largest streamers.  We will build a new chapter together with the creative and talented WarnerMedia team and these incredible assets built on a nearly 100-year legacy of the most wonderful storytelling in the world.  That will be our singular mission: to focus on telling the most amazing stories and have a ton of fun doing it.”


The new company, which could remain named Discovery or see a new name by the end of 2022, seeks to compete globally in the fast-growing direct-to-consumer business.

And, it will very much seek to bring “compelling content” to DTC subscribers across a portfolio that today includes discovery+ and HBO Max.

With cord-cutting a factor that companies such as WarnerMedia and Discovery must accept, rather than battle, as viewer consumption platform habits evolve, the merger immediately signals their combined desires to compete directly against Netflix, Amazon Video, Disney+ and Hulu on their own turf.

Further, AT&T and Discovery note, “The new company will be able to invest in more original content for its streaming services, enhance the programming options across its global linear pay TV and broadcast channels, and offer more innovative video experiences and consumer choices.”





LionTree LLC and Goldman Sachs & Co. LLC served as financial advisors and Sullivan & Cromwell LLP served as legal advisor to AT&T.

Allen & Company LLC and J.P. Morgan Securities LLC served as financial advisors and Debevoise & Plimpton LLP served as legal advisor to Discovery. Perella Weinberg Partners and Wachtell Lipton, Rosen & Katz served as advisors to the Independent Directors of Discovery.

RBC Capital Markets served as financial advisors and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal advisors to Advance.