WarnerMedia and Discovery in merger talks
MAY 17, 2021 08.26 EUROPE/LONDON BY CHRIS DZIADUL

REPORT: AT&T and Discovery are closing in on a deal that would see the creation of a streaming company worth $150 billion.

Quoting two people with direct knowledge of the matter, Financial Times reports that AT&T’s board met on Sunday, May 16 to approve a deal that would see its content arm WarnerMedia merged with Discovery.

It adds that although the structure of the deal remains unclear, AT&T is likely to control most of the combined entity. It has a market value of around $250 billion, compared to Discovery’s $24 billion.

The FT notes that the move comes five years after AT&T agreed to take over Time Warner for $85.4 billion. More recently, in 2019 AT&T and Discovery discussed combining their programming into a single streaming service only to shelve the plan following the launch of Disney+. Instead, AT&T went on to create HBO Max.

Meanwhile, Bloomberg reports that the deal between AT&T and Discovery will be structured as a so-called Reverse Morris Trust. This would mean the merger would be tax-free.

Bloomberg adds in a comment that, “AT&T’s potential combination of media assets with those of Discovery could provide the Turner properties with access to an international streaming platform while expanding the content library available to HBO Max. Our calculations suggest Turner’s assets alone, which include CNN, TNT and TBS, may be worth $40-$45 billion in a sale, which we view as an attractive alternative given AT&T’s need to fund its 5G and fibre build-out and pay down debt”.