New York, May 17 (EFE).- The merger of WarnerMedia and Discovery, valued at $43 billion and announced on Monday, will create a new media giant that could rival the current leaders of “streaming” content – Netflix and Disney – thanks to the joint firm’s more than 200,000 hours of programming from brands such as HBO, CNN, Warner Bros. and DC Comics.
After several days of rumors about a potential agreement, US telecommunications giant AT&T, which three years ago bought Time Warner and converted it into its WarnerMedia division, confirmed the merger on Monday, saying that it seeks to create a new global entertainment leader to be headed by top Discovery exec David Zaslav.
The firm resulting from the merger – which still must get the green light from regulators and stockholders, although the target date to close the deal is mid-2022 – will join under one umbrella one of the largest entertainment archives and about 100 historic entertainment brands, creating the second-largest media entity behind Disney, according to a statement issued by AT&T and Discovery.
According to the details released so far, the transaction has been approved by the boards of directors of both firms and AT&T will receive $43 billion in a combination of cash, debt securities and the retention of part of WarnerMedia’s debt.
With the merger, AT&T – in getting rid of its media business – looks to obtain greater financial flexibility so that it can expend its 5G network. The telecom giant is slated to receive $43 billion in a combination of cash, debt securities and WarnerMedia’s retention of debt, along with a 71 percent ownership stake in the new venture, with Discovery investors holding the rest.
The merger will give the newly created firm about $20 billion in combined spending ability for producing new movies and television shows.
With an eye on 2023, projections for the new firm are that it should take in $52 billion, with gross profits of $14 billion and an annual cost savings of $3 billion.
AT&T CEO John Stankey said at an online conference on Monday morning that he had spent a good bit of time thinking about the structure of the new firm, adding that stockholders will be able to profit from the company’s leadership in the telecom sector and in the firm’s 5G activities.
Zaslav, meanwhile, emphasized the advantage of combining the two brands and said that the shares of both firms will be more valuable if the companies are joined.
He said that with the huge library of intellectual property, the management teams and the global experience of the firms in every market in the world, the firms’ top leadership believes that everyone will come out a winner, adding that the merged entity will be better able to compete with other streaming leaders.
AT&T bought Warner Media for $85 billion in 2018 and since then it has restructured and changed the leadership of the former conglomerate, moves that some analysts say have been part of a failed strategy.
Among the media and entertainment names that the new firm will preside over are HBO, Warner Bros., Discovery, DC Comics, Cartoon Network, NGTV, Food Network, the Turner Networks, TNT, TBS, Eurosport, Magnolia, TLC and Animal Planet, along with many others.
In late March, WarnerMedia’s HBO Max platform had a global subscriber base of 64 million and Discovery revealed in April that it had 15 million subscribers worldwide, while Netflix has some 208 million and Disney+ more than 100 million.
Executives said that AT&T and Discovery have combined annual spending of $20 billion for content, putting the new firm ahead of Netflix, which invests about $17 billion in that area, and that could have repercussions in the sector.
The merger news initially sent the shares of both AT&T and Discovery up on Wall Street on Monday, with the former rising 4.5 percent and the latter rising 15 percent, although both eased back over the course of the trading day.