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).
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.
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.
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.
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.
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.