Announcement • Apr 10
Discovery, Inc. (NasdaqGS:DISC.A) completed the acquisition of Warner Media, LLC from AT&T Inc. (NYSE:T).
Discovery, Inc. (NasdaqGS:DISC.A) entered into a definitive agreement to acquire Warner Media, LLC from AT&T Inc. (NYSE:T) for $60.6 billion on May 17, 2021. The transaction is structured as a reverse morris trust transaction. As per the estimated preliminary purchase calculation, Discovery, Inc. will issue 1,701 Million shares to the shareholders of AT&T Inc. (NYSE:T). Discovery will also assume Long-term debt of $43.33 Billion. Under the terms of the transaction, AT&T Inc. will transfer the business, operations and activities that constitute the Warner Media segment, subject to certain exceptions to Magallanes, Inc. (Spinco, a wholly owned subsidiary of AT&T Inc). Xandr and Crunchyroll are not included in the transaction. In connection with the separation, Spinco will remain obligated for certain debt of the existing Warner Media business, make a cash payment and in certain circumstances issue certain debt securities to AT&T Inc. amounting to $43 billion. After the separation, AT&T Inc. will distribute to its stockholders the shares of common stock of Spinco held by it by way of either a pro rata dividend or an exchange offer. After the distribution, Drake Subsidiary, Inc. (a merger subsidiary of Discovery, Inc.) will be merged with and into Spinco with Spinco as the surviving entity and a wholly owned subsidiary of Discovery. Following the completion of the merger, holders of the shares of common stock, of AT&T Inc. will own approximately 71% of the outstanding capital stock of the new company. Discovery shareholders will hold 29% in the new company. As a result of the merger, each share of Spinco common stock then issued and outstanding will automatically be converted into the right to receive a number of shares of Discovery common stock, such that the aggregate number of shares of Discovery common stock issued to holders of AT&T's common stock as a result of the merger represent approximately 71% of the outstanding shares of Discovery common stock on a fully diluted basis following the completion of the merger. Discovery’s current multiple classes of shares will be consolidated to a single class with one vote per share. AT&T shareholders, including employees who own shares, will retain their stake and get a stake in the new company. Warner Media has secured fully committed financing from JPMorgan Chase Bank, N.A. and affiliates of Goldman Sachs & Co. LLC for the purposes of funding the distribution. As of June 4, 2021, Spinco entered into a $10 billion term loan credit agreement with JPMorgan Chase and the funds will be used solely to finance a portion of the cash distribution by Spinco to AT&T in connection with a transaction. Discovery will be required to pay AT&T Inc. a termination fee of $720 million or AT&T Inc. will be required to pay Discovery a termination fee of $1.77 billion. Following the closing of the transaction, the WBD common stock is expected to be listed on the NASDAQ Global Select Market under the ticker “WBD.” AT&T will continue to trade on the NYSE under the ticker “T.”
At the effective time of the merger, Discovery will set the size of its Board of Directors at 13 members, consisting of five Directors designated by the Discovery Board, and the Chief Executive Officer of Discovery as of immediately after the effective time, and seven Directors designated by AT&T Inc. (including the Director who will serve as the Chairperson of the Discovery Board). In addition, the merger agreement provides that David Zaslav, the current Chief Executive Officer of Discovery will be appointed as Chief Executive Officer of the combined company. As of May 18, 2021, Discovery announced the extension of President and Chief Executive Officer David Zaslav’s employment contract through December 31, 2027. The current AT&T board members being named to the WBD Board will step down from the AT&T board upon the closing of the combination are Samuel A. Di Piazza as Board Chair of Warner Bros. Discovery, Inc., David Zaslav as President and Chief Executive Officer, Warner Bros. Discovery, Inc., Robert R. Bennett, Li Haslett Chen, Richard W. Fisher, Paul A. Gould, Debra L. Lee, John C. Malone, Fazal Merchant, Steven A. Miron, Steven O. Newhouse, Paula A. Price and Geoffrey Y. Yang. Jason Kilar has exited WarnerMedia days ahead of its merger with Discovery, Inc.
The transaction is subject to consummation of the distribution, approval of Discovery’s stockholders, listing of Discovery Common Stock issuable to holders of Spinco Common Stock on Nasdaq, receipt of applicable regulatory approvals, including the expiration or early termination of the statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other required regulatory approvals, the effectiveness of the registration statements to be filed by Discovery and Spinco with the Securities and Exchange Commission pursuant to the merger agreement and AT&T's receipt of the Spinco Special Cash Payment in accordance with the terms of the Separation Agreement. No vote is required by AT&T shareholders. The Boards of Directors of both AT&T and Discovery have unanimously approved the transaction. John C. Malone and Advance/Newhouse holding 44% stake in Discovery, entered into the voting agreement with AT&T Inc. under which the stockholders agreed to vote the shares of Discovery capital stock owned by them in favor of approval of the issuance of Discovery Common Stock to AT&T stockholders. As of December 22, 2021, the European Commission has approved the transaction. On December 29, 2021, AT&T gets favorable IRS ruling signaling that the transaction would be tax-free for shareholders. As of February 9, 2022, the HSR Act waiting period has expired or otherwise been terminated. The transaction is anticipated to close in mid-2022. As of January 26, 2022, the transaction is expected to close in second quarter of 2022. As of February 12, 2022, Warner Media has passed final approval from the US government. The final step needed to complete the merger is a vote of Discovery’s shareholders, which is believed to be a formality. The shareholders meeting Discovery will be held on March 11, 2022. The spinoff and merger are reportedly expected to take effect in April 2022. The transaction is expected to close in the second quarter of 2022. As of March 15, 2022, the transaction is expected to occur early in the second quarter of 2022. As of April 5, 2022, the merger is expected to finalize within the next few days.
LionTree LLC and Goldman Sachs & Co. LLC acted as financial advisors; and Eric M. Krautheimer and Melissa Sawyer of Sullivan & Cromwell LLP acted as legal advisors to AT&T. Allen & Company LLC and J.P. Morgan Securities LLC acted as financial advisors; and Jeffrey J. Rosen, Jonathan E. Levitsky and Sue Meng of Debevoise & Plimpton LLP acted as legal advisors to Discovery. Peralla Weinberg Partners acted as the financial advisor; and Andrew J. Nussbaum and Karessa L. Cain of Wachtell Lipton, Rosen & Katz acted as legal advisors to the Independent Directors of Discovery. RBC Capital Markets acted as financial advisor and Robert B. Schumer, Ariel J. Deckelbaum and Cullen L. Sinclair of Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal advisors to Advance. Mario Ponce of Simpson Thacher acted as legal advisor to Goldman Sachs & Co. LLC. Computershare Trust Company, National Association acted as a transfer agent to Discovery. KPMG US LLP acted as a legal advisor to Discovery. Ernst & Young LLP acted as accountant to AT&T. Innisfree M&A Inc. acted as an information agent to Discovery. Allen & Company LLC and J.P. Morgan Securities LLC acted as a fairness opinion provider to Discovery. Discovery has agreed to pay Allen & Company an aggregate cash fee of $75 million, of which a portion was payable upon delivery of Allen & Company’s opinion and $67.5 million is payable contingent upon consummation of merger.
Discovery, Inc. (NasdaqGS:DISC.A) completed the acquisition of Warner Media, LLC from AT&T Inc. (NYSE:T) on April 8, 2022. The combined company, Warner Bros. Discovery, Inc. will begin trading on the Nasdaq with the start of trading on April 11, 2022, under the new ticker symbol “WBD.” WarnerMedia’s Gerhard Zeiler will serve as president international for the new company. Kathleen Finch will be taking on a larger role as chief content officer, US Networks Group. Reporting to Finch are Nancy Daniels, chief content officer of Discovery Factual networks; Bruce Weitz, and, general manager of TBS, TNT and truTV, and Tom Ascheim, president Warner BRos. Global Kids, Young Adults and Classic. Discovery as with other media companies, will be overseen by JB Parette, who ran Discovery Streaming and International.
