AT&T Strikes $43 Billion Deal With Discovery To Launch New Streaming Giant

After news of the impending deal leaked over the weekend, AT&T has confirmed its deal to spin off its media assets and combine them with Discovery's suite of reality-TV-focused entertainment properties to create a new streaming rival with the heft to compete with Disney and Netflix.

As several media outlets including CNBC and the FT pointed out, the $43 billion spinoffs/tie-up is the latest step by AT&T CEO John Stankey (who took over as chief executive last year) to unwind his predecessor's expansionist legacy (even at a loss), and instead refocusing the company on its core business. The deal will leave

Discovery shares soared 19% in the premarket trade, while AT&T shares climbed more than 4%, a sign that the market approves of the deal to create yet another streaming competitor in a market that has seen a flurry of new entrants over the past year.

AT&T’s dollar bonds may rally behind their euro counterparts. Meanwhile, Goldman Sachs and JPMorgan are providing $41.5 billion in bridge loans.

AT&T's vast WarnerMedia holdings, which include CNN and HBO, will combine with Discovery's assets - including Discovery Channel and Animal Planet - to create what management hopes will be a formidable competitor to Netflix and Disney. AT&T would get $43 billion in the deal, roughly half of the princely sum of $85 billion that AT&T spent on the assets less than three years ago (not to mention all the money in legal fees the company spent fending off antitrust concerns). WarnerMedia division includes the TBS, TNT, and HGTV cable channels, and other names in their media portfolio such as HBO, and would constitute one of Hollywood's most valuable catalogs.

FT reports that David Zaslav, Discovery’s long-serving chief executive, will lead the combined newly publicly trade company, which will be 71% owned by AT&T shareholders. Jason Kilar, the executive brought in last year to accelerate WarnerMedia’s shift to streaming with HBO Max, was not mentioned in the merger filing, and it's not clear whether he will have a role in the new company.

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