AT&T Mega-Merger With Discovery: How Should Shareholders React?

Telecom giant AT&T Inc. (T) has long been a reliable dividend holding for income investors. AT&T has typically offered a high dividend yield well above the market average. In addition, AT&T has increased its dividend each year for over 30 consecutive years, earning it a place on the exclusive Dividend Aristocrats list.

But AT&T has not increased its dividend in over a year, mainly due to an elevated debt load as a result of its acquisition spree over the past few years.

Now, AT&T is looking to get rid of many major assets it has acquired in recent years—including DIRECTV and WarnerMedia—which could have negative implications for its dividend.

This article will discuss AT&T’s recent mega-merger news, and how AT&T shareholders should position themselves moving forward.

Photo by Galen Crout on Unsplash 

Transaction Overview

AT&T is a telecommunications giant, providing a wide range of services, including wireless, broadband, and television. The company currently operates in three business units:AT&T Communications (providing mobile, broadband and video to over 100 million U.S. consumers and nearly 3 million businesses), WarnerMedia (including Turner, HBO, Warner Bros. and Xandr), and AT&T Latin America serving 11 countries.

AT&T is a mega-cap stock with a market capitalization above $200 billion.

The company made a huge move on May 17th, 2021 when it announced an agreement to combine WarnerMedia with Discovery, Inc. (DISCA) to create a new global entertainment company.

Source: Investor Presentation

Under the terms of the transaction AT&T will receive $43 billion in a combination of cash, securities and retention of debt.

In addition, AT&T shareholders receive stock representing 71% of the new company, with Discovery shareholders owning 29%. The company will combine HBO Max and Dsicovery+ to compete in the direct-to-consumer business, bringing together names like HBO, Warner Bros., Discovery, CNN, HGTV, Food Network, TNT, TBS and more.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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Roger Keats 3 weeks ago Member's comment

Hope ur right