Discovery completed its acquisition of WarnerMedia from AT&T on Friday. The close of the transaction births new company Warner Bros. Discovery, which will begin trading on the Nasdaq Monday under the new ticker symbol “WBD.”
WarnerMedia owns HBO, HBO Max, CNN, Warner Bros., DC Films, New Line Cinema, TBS, TNT, TruTV, Cartoon Network/Adult Swim, Turner Sports and Rooster Teeth, among other brands, and is part owner of the CW Network along with Paramount.
Discovery is the parent of Discovery Plus, Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, Turbo/Velocity, Animal Planet, Science Channel and OWN (Oprah Winfrey Network).
At close of the WarnerMedia spinoff, AT&T had said it expected to reap $43 billion (and the new WBD to assume up to approximately $43 billion of additional debt). AT&T aimed to use the proceeds from the WarnerMedia spinoff to pay down net debt, which stood at $156.2 billion at the end of 2021.
Per Warner Bros. Discovery’s Friday release announcing the closed transaction, “AT&T received $40.4 billion in cash and WarnerMedia’s retention of certain debt. Additionally, shareholders of AT&T received 0.241917 shares of WBD for each share of AT&T common stock they held at close. As a result, AT&T shareholders received 1.7 billion shares of WBD, representing 71% of WBD shares on a fully diluted basis.” AT&T had put in the disclaimer “$43 billion (subject to adjustments)” in prior announcements.
According to WBD, “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.”
“Today’s announcement marks an exciting milestone not just for Warner Bros. Discovery but for our shareholders, our distributors, our advertisers, our creative partners and, most importantly, consumers globally,” David Zaslav, Warner Bros. Discovery CEO, said. “With our collective assets and diversified business model, Warner Bros. Discovery offers the most differentiated and complete portfolio of content across film, television and streaming. We are confident that we can bring more choice to consumers around the globe while fostering creativity and creating value for shareholders. I can’t wait for both teams to come together to make Warner Bros. Discovery the best place for impactful storytelling.”
“We are at the dawn of a new age of connectivity, and today marks the beginning of a new era for AT&T,” John Stankey, AT&T CEO, said. “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. 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.”
Here is the new leadership structure for Warner Bros. Discovery, as announced by Zaslav on Thursday.
On Friday, it was revealed Jon Steinlauf will oversee U.S. ad sales for the new Warner Bros. Discovery, a key position at the company that is, like many other senior operating roles, going to an executive who has familiarity working with Zaslav.
Before these appointments were announced, several WarnerMedia execs exited their current roles: WarnerMedia CEO Jason Kilar; Andy Forssell, EVP and general manager of HBO Max; Ann Sarnoff, chair and chief executive officer of WarnerMedia’s studios and networks group; Jennifer Biry, chief financial officer; Jim Cummings, EVP, chief human resources officer; Tony Goncalves, EVP, chief revenue officer; Christy Haubegger, EVP, communications and chief inclusion officer; Jim Meza, EVP, general counsel, WarnerMedia; and Richard Tom, chief technology officer. In some cases, executives declined offers to stay in different capacities.
Discovery execs have already confirmed long-term plans to combine streaming platforms HBO Max and Discovery Plus as one platform under Warner Bros. Discovery.
Discovery ended 2021 with $4 billion in cash on its books, and it generated some $2.4 billion in free cash flow for the year. Warner Bros. Discovery will shoulder significant debt post-transaction, with Discovery executives vowing to reduce the leverage ratio from about 4.5 times earnings immediately after the deal closes to 2.5 to 3 times earnings within two years. Discovery raised $30 billion in senior unsecured notes in a debt offering to build up cash for the merger, the biggest bond raise in the company’s history.
On March 11, Discovery investors voted in approval of the acquisition, marking one of the final formal steps before the transaction can close. The merger was earlier approved by the U.S. Department of Justice, the European Commission and the boards of directors of both AT&T and Discovery.
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