AT&T to merge media assets with Discovery in $57b deal

NEW YORK • AT&T is spinning off its media operations in a deal with Discovery that will create a new entertainment firm, merging assets ranging from CNN and HBO to HGTV and the Food Network.

AT&T will receive US$43 billion (S$57 billion) in cash, debt securities and debt retention, with its shareholders getting stock representing 71 per cent of the new entity, the companies said in a statement yesterday. Discovery chief executive officer David Zaslav is to lead the new entity.

The plan, first reported by Bloomberg News, would combine Discovery's reality-TV empire with AT&T's vast media holdings, creating a formidable competitor to Netflix and Walt Disney.

It marks a retreat for AT&T's entertainment industry ambitions after years of working to assemble telecommunications and media assets under one roof. AT&T gained some of the biggest brands in entertainment through its US$85 billion acquisition of Time Warner, completed in 2018.

The transaction includes all of AT&T's WarnerMedia operations. In addition to CNN and HBO, AT&T's WarnerMedia division owns Cartoon Network, TBS, TNT and the Warner Bros studio. Discovery, backed by cable mogul John Malone, controls networks such as TLC and Animal Planet.

Trading in Discovery shares, up 17 per cent in pre-market transactions, was halted for the announcement. AT&T stock rose 4.8 per cent.

"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," AT&T CEO John Stankey said in the statement.

"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."

The deal underscores the difficulty telecoms companies have had finding a pay-off from their media operations. Verizon Communications announced its plan to slim down earlier this month. The company agreed to sell its media division to Apollo Global Management for US$5 billion, a move that will offload online brands like AOL and Yahoo.

AT&T was the second-highest bidder in the Federal Communications Commission's sale of airwaves, committing US$23 billion. Verizon, the top bidder, agreed to pay US$45 billion.

The Discovery agreement comes just months after AT&T reached a deal to spin off its DirecTV operations in a pact with buyout firm TPG. AT&T also agreed in December to sell its anime video unit Crunchyroll to a unit of Sony Corp for US$1.2 billion.

BLOOMBERG