US telecommunications giant AT&T announced on Monday a deal combining its WarnerMedia content unit with Discovery, paving the way for one of Hollywood’s largest studios to compete with rival media giants Netflix and Disney.
Under the terms of the deal, AT&T said it would receive a total amount of $ 43 billion in a combination of cash, debt and the retention of certain debt by WarnerMedia.
Discovery shareholders would own 29% of the new company, he added.
It comes after reports over the weekend that the companies were in advanced talks to complete the merger.
If approved by regulators, the deal effectively reverses AT & T’s yearlong plan to combine content and distribution into one vertically integrated company.
The deal is expected to create a new business, separate from AT&T, that could be valued at up to $ 150 billion, including debt, according to The Financial Times.
Shares of US media company Discovery rose 14% in pre-market trading, while AT & T’s share price rose about 5%.
“This agreement unites two entertainment leaders with complementary content strengths and positions the new company as one of the leading global direct-to-consumer streaming platforms,” AT&T CEO John Stankey said in a statement.
“AT&T shareholders will retain their stake in our leading communications company that comes with an attractive dividend. In addition, they will get a stake in the new company, a global media leader that can build one of the best streaming platforms in the world, ”he said. additional.
AT&T owns CNN, HBO, and Warner Bros after it acquired Time Warner, which later changed its name to WarnerMedia, for $ 109 billion in 2018. Discovery’s channels include Animal Planet and the Discovery Channel.
HBO and HBO Max, owned by WarnerMedia, have about 64 million subscribers worldwide. Discovery said last month that it had reached 15 million paying subscribers.
By contrast, Netflix currently has around 208 million global subscribers, while Disney + recently surpassed 100 million less than a year and a half after the launch of the streaming service.
– CNBC’s Alex Sherman contributed to this report.