WarnerMedia-Discovery Merger Is a Major Media Opportunity for AT&T

By

May. 17 2021, Published 1:19 p.m. ET

In a bold move to grasp its share of the media industry, parent company AT&T (NYSE:T) is merging its previously acquired WarnerMedia with Discovery (NASDAQ:DISCA).

Article continues below advertisement

This new acquisition will result in a separate company independent of AT&T. Both AT&T and Discovery shareholders will retain stake in the outcome.  

Details of the transaction for WarnerMedia and Discovery merger with AT&T

AT&T has announced that it's combining WarnerMedia—its entertainment and news asset—with Discovery's entertainment brand. The resulting formation will be a "standalone global entertainment company," according to an AT&T press release.  

Article continues below advertisement

There isn't a brand name for the new formation yet, but it might retain the Discovery name. AT&T is shedding WarnerMedia in the process.

Whatever the result, AT&T is getting an estimated $43 billion from the deal, which includes cash and debt securities. Reports suggest that the new company could be worth as much as $150 billion

Article continues below advertisement

What AT&T and Discovery shareholders should know

AT&T and Discovery shareholders will receive a stake in the deal, despite the fact that the merger will result in a new and independent company.

Existing AT&T shareholders will receive stock representing 71 percent of the newly formed operation. Meanwhile, Discovery shareholders will receive the remaining 29 percent.  

Article continues below advertisement

How AT&T stock is performing with the news

AT&T shares are up in the short term, with pre-market trading leading to a 3.94 percent boost. The shares have since dropped 1.73 percent for a midday stock price of $32.93 on May 17.

How Discovery's stock price is performing after the merger announcement

Discovery stock has also fluctuated the needle, with pre-market trading leading to a 10.23 percent boost before falling off another 11.01 percent. The shares are trading at $34.94 by midday on May 17. Since Discovery isn't dissolving like WarnerMedia, the move could be good news for shareholders.

Article continues below advertisement

When will the WarnerMedia and Discovery deal from AT&T finalize?

The AT&T merger deal must be approved by regulators before anything is set in stone. Assuming it gets approved, the deal will be complete by the end of 2022. AT&T hopes that this new company will be prime competition for streaming leaders like Netflix and Disney+.

The streaming industry has been a winner over the last year. Many people stayed home indefinitely due to the COVID-19 pandemic. As a result of this cultural shift, at-home entertainment has become a stronger force than ever before. AT&T's goal to take on the giants is a tall task, but it's one that could be lucrative for the company and its investors in the long run.

AT&T and Discovery stock have been volatile over their lifetimes, and changing the game through a new and independent entity could help both companies manifest an upward trajectory if successful. AT&T plans to release a name for the brand in the coming days, which will highlight the next steps for the proposed merger between WarnerMedia and Discovery, Inc. After paying $85 billion for Time Warner just three years ago, this new merger isn't a small feat. 

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.