American media and telecom houses AT&T and Discovery will merge their assets to launch a streaming platform, the companies announced on Monday.
While AT&T owns Warner Bros., which is the parent company of HBO, Cartoon Network, and CNN; Discovery is into reality television shows on nature and lifestyle.
“This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms,” said AT&T chief executive John Stankey.
“It will support the fantastic growth and international launch of HBO Max with Discovery’s global footprint and create efficiencies which can be reinvested in producing more great content to give consumers what they want,” Stankey added.
The combined entity will be worth $130 billion including debt, based on WarnerMedia’s estimated enterprise value of more than $90 billion. AT&T will receive $43 billion in cash, debt securities and debt retention, with its shareholders getting stock representing 71% of the new company, the companies said in a statement. The deal is structured as a tax-friendly Reverse Morris Trust.
AT&T is an American multinational telecommunications company that includes among other key assets, the acquisition of Warner Media in 2018 and its subsequent network groups such as Adult Swim, Boomerang, TBS, TNT, DC Comics, Turner Classic Movies, and TruTv, to name a few.
The $85 billion acquisition that ended in 2018 after a chase for almost two years, also left AT&T heavily indebted. AT&T took on debt for that acquisition, and this latest deal is a chance for the company to reduce its debt load while shifting its focus to the wireless business at a pivotal moment, according to a Market Watch report.
The new company will be led by Discovery’s chief executive officer David Zaslav.
Discovery, backed by John Malone, controls networks like TLC and Animal Planet. The new company’s name will be announced this week, Zaslav said on the conference call.
The AT&T and Discovery’s streaming service will be giving competition to platforms like Netflix and Disney+.