AT&T will merge media assets with Discovery for $43 billion

AT&T and Discovery are preparing to merge content to build an independent global entertainment media platform. Discovery Channel CEO David Zaslav will lead the new company, which includes one of Hollywood’s strongest studios, Harry Potter and Batman franchises, CNN, sports shows and Discovery Channel Lots of content.

In 2018, AT&T acquired Time Warner for US$108.7 billion and DirecTV for US$68 billion in 2015. The latest transaction proves that AT&T has always wanted to become a telecommunications and media giant. LightShed Partners partner Rich Greenfield (Rich Greenfield) believes: “To control streaming media assets, Discovery will take about a year. After the transaction is completed, the new company will be better, but it will take time.”

AT&T holds more than 160 billion U.S. dollars in debt. After tax-free divestiture of media assets, it will receive 43 billion U.S. dollars, and the company will use the money to repay its debts. In addition, AT&T is also preparing to reduce the dividend distribution rate from approximately 60% in the previous quarter to the 40% range.

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The newly established company will be valued at more than US$120 billion, with US$58 billion in debt, of which US$43 billion will come from WarnerMedia and US$15 billion will come from Discovery Channel. As for the name of the new company, it will not be announced until next week. The latest deal proves that TV viewers are shifting to streaming media, and companies must expand their scale if they want to compete with Netflix and Disney.

After the merger, the new company will invest US$20 billion in content. Last year, Netflix’s content investment was approximately US$17 billion. According to estimates, the new company will receive 52 billion U.S. dollars in revenue in 2023, and adjusted EBITDA will be approximately 14 billion U.S. dollars. The transaction is expected to be completed in the middle of 2022, and now still needs the approval of Discovery Channel shareholders and regulators.

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