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AT&T Board Meets as Discovery Merger Discussions Accelerate; Shock Reverberates Around WarnerMedia

Pact to combine HBO, Warner Bros. with Discovery, Food Network, HGTV could come as early as Monday morning

AT&T, Discovery Merger Talks Accelerate

Negotiations for a potential merger of WarnerMedia and Discovery accelerated on Sunday as the shock of a possible transaction ricocheted around the halls of HBO, Warner Bros. and other legacy Time Warner companies that have been on a roller-coaster ride of disruption since 2016.

Sources said AT&T leadership was meeting Sunday to discuss the transaction and multiple sources confirmed that AT&T board members gathered Sunday to discuss the details. News of the potential tie-up of cable giants was broken early Sunday by Bloomberg News. All signs are pointing to a deal announcement as early as Monday morning.

Multiple sources said the deal under discussion was a joint venture that would merge AT&T’s media assets — primarily the collection of networks and the storied Warner Bros. studio — with Discovery’s collection of domestic and international cable channels, anchored by Discovery, TLC, Animal Planet and OWN as well as lifestyle juggernauts Food Network and HGTV. The two companies are looking to combine forces to add heft to the program offerings on newly launched streaming services, AT&T’s HBO Max and Discovery’s Discovery Plus.

The enterprise valuation under discussion is understood to be well over $100 billion. Discovery CEO David Zaslav would be atop the combined venture. WarnerMedia CEO Jason Kilar would be tasked with leading the company’s direct to consumer charge. Representatives for AT&T, Discovery and WarnerMedia declined comment Sunday.

Word of the deal was a head-swiveling surprise for WarnerMedia insiders even at the senior management level. Executives expressed shock that a company that has experienced three massive restructuring and a round of mass layoffs since 2018, is in for yet another corporate configuration. The executive ranks at HBO, Warner Bros. and the former Turner cable networks have all seen wholesale departures during the same time frame as AT&T bulldozed the historic silos built for a different era of the business in the Time Warner era.

There was also shock expressed that AT&T would look for an exit strategy so soon after acquiring some of Hollywood’s crown jewels. The potential WarnerMedia transaction coming so soon on the heels of AT&T’s fire sale transaction with TPG to offload DirecTV is seen as a sign of capitulation that AT&T can’t make one plus one equal three by combining wireless, data and video content services.

“There’s no way this deal doesn’t make AT&T look like fools,” said a WarnerMedia veteran.

There was also trepidation about a future lead by the hard-charging Discovery CEO David Zaslav. Zaslav has a reputation as a strong-willed CEO who is known for turning over management teams and shifting strategic gears quickly when results are not to his liking. Sources also indicated that the hand of legendary media investor John Malone, a large individual shareholder in Discovery, is at work in the deal talks.

Moreover, Zaslav is also a longtime friend, associate and former NBC colleague of CNN Worldwide chief Jeff Zucker, who could play a larger role in the combined entity. Zucker had announced his plan to step down from his role as head of news and sports for WarnerMedia, but sources say this transaction could leave him in a bigger managerial role.

In the meantime, staffers at WarnerMedia units were burning up cellular data on text chains throughout Sunday, commiserating and sharing scraps of information as they braced for more changes to come.

“People are in shock,” said a longtime WarnerMedia insider. Department heads lamented the promise that the coming days would involve the laborious process of trying to reassure executives at a time when the future is anything but clear.

“Here we go again,” one executive said.

Longtime Time Warner executives also marveled at the ability of their AT&T counterparts at the corporate headquarters in Dallas to keep information quiet. Multiple sources said there had been no hints of anything like merger talks or due-diligence preparations. In 2019, there was much more chatter in the halls about the informal deal whispers between WarnerMedia and NBCUniversal, which never came to fruition.

AT&T’s cone of silence is in sharp contrast to most Hollywood companies. “It’s a fortress,” an HBO executive said.