AT&T details deal structure for WarnerMedia sale

AT&T and its board of directors today announced a decision to spin off 100% of its interest in WarnerMedia to AT&T’s existing shareholders ahead of the Discovery merger.

Under the terms of the all-stock transaction, AT&T will receive $43 billion and AT&T’s shareholders will receive stock representing approximately 71% of the new company, Warner Bros. Discovery, Inc. Existing Discovery shareholders will own approximately 29% of the new company on a fully diluted basis.

On the closing date of the transaction, each AT&T shareholder will receive, on a tax-free basis, an estimated 0.24 shares of the new Warner Bros. Discovery common stock for each share of AT&T common stock held. AT&T shareholders will continue to hold the same number of shares of AT&T after the transaction closes.

“In evaluating the form of distribution, we were guided by one objective — executing the transaction in the most seamless manner possible to support long-term value generation,” said AT&T CEO John Stankey in a statement. “We are confident the spin-off achieves that objective because it’s simple, efficient and results in AT&T shareholders owning shares of both companies, each of which will have the ability to drive better returns in a manner consistent with their respective market opportunities.”

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“Rather than try to account for market volatility in the near-term and decide where to apportion value in the process of doing an exchange of shares, the spin-off distribution will let the market do what markets do best. We are confident both equities will soon be valued on the solid fundamentals and attractive prospects they represent,” he added.

As previously announced, Discovery President and CEO David Zaslav will run the combined company, which will own Discovery+, HBO Max, Warner Bros. and several of the most popular cable networks. The merger is expected to close in the second quarter.

Warner Bros. Discovery expects cost synergies of more than $3 billion on a run-rate basis by the end of the second full year after the closing of the transaction thanks to new technology, marketing and platform efficiencies.

AT&T plans to hold an investor meeting on March 11 to further discuss merger details.