Telecoms titan AT&T is finalizing a merger between its media assets with Discovery. The assets, which include CNN and HBO, will become part of the Discovery lineup of lifestyle TV networks such as HGTV and TLC.
Unnamed sources provided the information used by news reports.
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End of Media Assets Venture for AT&T
The purported deal will mark the unwinding of AT&T’s $108.7 billion venture into media assets with their Time Warner purchase.
This also signals the company’s admission that TV viewership already moved online. However, scale is needed to take on the likes of services with more than 100 million subscribers like Disney + and Netflix.
The new merger will result in a company independent from AT&T with a value of $150 billion. In contrast, Discovery holds a market value of $30 billion including debt. Many expect the official news about the deal to push through. Spokespeople for both companies declined to comment.
Once completed, the merger will combine two diverse entities. Through its WarnerMedia unit, AT&T owns CNN, HBO, Cartoon Network, TBS, TNT, and the Warner Bros. studio.
It is also home to powerful movie franchises such as the DC Universe and the Harry Potter series. Meanwhile, Discovery is financed by cable mogul John Malone and owns networks such as HGTV, Food Network, TLC, and Animal Planet.
Warner, through HBO and HBO Max, currently has 88/3 million members across the United States. Meanwhile, the streaming service Discovery + signed up 15 million.
In contrast, HBO and HBO Max now have 63.9 million global subscribers. However, both services pale in comparison to Disney +, with 100 million subscribers, and Netflix, which lists 207.6 million active members.
Debt Reduction Strategies
AT&T sought to unload its debt-riddled acquisitions in order to improve its balance sheet. Last February, the company sold a third of satellite TV service DirecTV.
The DirectTV carried a purchase price of $68 billion when AT&T purchased it in 2015. However, the DirectTV sale to TPG Capital fetched only $16.25 billion.
The media assets sale is part of AT&T CEO John Stankey’s attempts at cleaning the house. Previously, the CEO cut staff and sold off underperforming assets. The company will now focus on rolling out its 5G wireless network and expanding its fiber-optic network.
A New Media Assets Company Will Emerge
The new company will have Discovery Chief Executive Officer David Zaslav as its head. Zaslav helped Discovery grow through acquisitions, including a purchase of HGTV owner Scripps Networks Interactive Inc. that closed in 2018.
Discovery’s class A shares rose more than 18% this year, valuing the company at almost $24 billion. Meanwhile, AT&T gained 12%, giving it a market capitalization of $230 billion.
At present, both companies are still in the middle of talks. Many items remain for discussion, and the talk can collapse at any point.
Watch the Bloomberg Markets & Finance video reporting that AT&T poised to spin off media assets in deal with Discovery:
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