This morning, AT&T continues operation as a wireless communications carrier, without its WarnerMedia business unit. A transaction between Discovery and AT&T closed on Friday, with AT&T spinning off WarnerMedia and Discovery absorbing the larger WarnerMedia company to become Warner Bros. Discovery. Many, perhaps most, AT&T shareholders will receive this morning shares in Warner Bros. Discovery, depending on how they might have opted to continue their ownership of shares.
“We are at the dawn of a new age of connectivity, and today marks the beginning of a new era for AT&T,” said John Stankey, AT&T chief executive officer, on Friday. “With the close of this transaction, we expect to invest at record levels in our growth areas of 5G and fiber, where we have strong momentum, while we work to become America’s best broadband company. At the same time, we’ll sharpen our focus on returns to shareholders. We expect to invest for growth, strengthen our balance sheet and reduce our debt, all while continuing to pay an attractive dividend that puts us among the top dividend paying stocks in America.
“In WarnerMedia, Discovery inherits a talented and innovative team and a dynamic growing and global company that is well positioned to lead the transformation that’s taking place across media and entertainment, direct-to-consumer distribution and technology,” Stankey said. “The combination of the two companies will strengthen WarnerMedia’s established and leading position in media and streaming. And our shareholders will now have a significant stake in Warner Bros. Discovery and its future successes. We look forward to seeing what the WBD team accomplishes with these industry-leading assets.”
Under terms of the agreement, which was structured as a Reverse Morris Trust transaction, at close AT&T received $40.4 billion in cash and WarnerMedia’s retention of certain debt, according to a statement issued jointly by the two companies. Additionally, shareholders of AT&T received 0.241917 shares of WBD for each share of AT&T common stock they held at close, the companies said. As a result, AT&T shareholders received 1.7 billion shares of WBD, representing 71 percent of WBD shares on a fully diluted basis, the statement reads. It said Discovery’s existing shareholders own the remainder of the new company. In addition to their new shares of WBD common stock, AT&T shareholders continue to hold the same number of shares of AT&T common stock they held immediately prior to close, the companies said.
“Warner Bros. Discovery will create and distribute the world’s most differentiated and complete portfolio of content, brands and franchises across television, film and streaming,” the statement reads. “The new company combines WarnerMedia’s premium entertainment, sports and news assets with Discovery’s leading non-fiction and international entertainment and sports businesses, including Discovery Channel, discovery+, Warner Bros. Entertainment, CNN, CNN+, DC, Eurosport, HBO, HBO Max, HGTV, Food Network, Investigation Discovery, TLC, TNT, TBS, truTV, Travel Channel, MotorTrend, Animal Planet, Science Channel, New Line Cinema, Cartoon Network, Adult Swim, Turner Classic Movies and others.”
In November 2021, WarnerMedia laid off employees to cut its costs, a few weeks after the Wall Street Journal reported the company was looking to cut costs by as much as 20 percent and potentially lay off thousands of workers, according to a Variety report. At the time, WarnerMedia CEO Jason Kilar made the announcement. Last week, he himself left WarnerMedia, ahead of the spinoff of the company. What the Daily Mail called a firing spree resulted in nine top executives leaving WarnerMedia last week. All were members of Kilar’s management team, the Daily Mail said.
The media outlet reported Zaslov as having plans to weed out at least $3 billion in cost synergies by 2023, representing savings incurred by cutting operating costs after the merger.