AT&T, Warner Bros. Discovery Deal causes conspiracy twists for investors

Prime Time TV came early Monday morning to investors as the blockbuster deal between Discovery and AT&T (T) came to an end – clarifying the picture for the new Warner Bros. Discovery. (WBD).

Judging by the reaction of the market, this deal has earned high ratings for every company and there are already shareholders in getting good incentives. Although stock trends diverged slightly on Tuesday, overall sentiment remained positive.

“These media-cooperative merger deals are a strategy for acquiring diversified content. This comes a few years before the acquisition of DIS by Fox (FOXA). Real money. “Through the unwritten documentaries, lifestyle and DIY brand and WarnerMedia’s script features and more of the episodic brands and channels, Discovery has the opportunity to capture an integrated market to compete with all competitors.”

But he noted that “there is a devil in the data” for investors who own both companies as details of the merger remain open to debate.

Contract details

AT&T received $ 40.4 billion in cash and paid off a portion of the debt, while Warner Bros. Discovery received several programs to add to its streaming and cable offerings.

“Today’s announcement marks an exciting milestone not only for Warner Bros. Discovery, but also for our partners, our distributors, our advertisers, our creative partners and, most importantly, our global consumer,” said David Jaslow, CEO of the new company. . “With our joint ventures and diversified business model, Warner Bros. Discovery offers a very diverse and complete portfolio of content across film, television and streaming.”

Streaming offers from HBO Max, Discovery + and CNN + are included in this very popular portfolio; And cable channels such as TNT, TBS, TLC, truTV, Animal Planet, Cartoon Network and more. The acquisition of the new company to compete with current streaming leaders such as Netflix (NFLX), Apple (AAPL) and Amazon (AMZN) remains debatable.

In addition, AT&T’s shareholders received a quarter of WBD’s hold of each of AT&T’s holdings prior to the agreement. Therefore, the former AT&T shareholders now hold most of the outstanding shares in the new company. Both Discovery and AT&T shareholders should take a closer look at the newly launched company.

Digging in the new invention

The reason for the discovery is straightforward. Content is king and this deal protects the company’s huge list of shows and movies.

Most importantly, it protects HBO Max for the company, which is currently one of the most popular entertainment offerings and is known for delivering premium shows and movies. The HBO Max 2021 ended up with a total of 73.8 million global subscribers, which tripled the number of existing Discovery + users. Therefore, the new company will attract 100 million streaming subscribers worldwide.

“As an integrated company, Warner Bros. Discovery is rich in content and has numerous assets for streaming,” said Navdeep Saini, CEO of media technology company DistroTV. Real money. “WBD (streaming video on demand) is good on SVOD, but the company’s omission (free ad support streaming TV) is a fast platform.

From this point on, he said, inclusion in clear programming and clear focus would be a big boost for the company.

However, not all ratings are very encouraging.

Rick Ellis, founder of All YourScreens, a media analytics firm, said: Real money. “But merging the two companies’ streaming businesses can be challenging, especially given the fact that their streaming businesses are very different internationally.”

He added that the risk of consolidation also increases due to administrative changes that are somewhat uncertain. This only adds to the debt burden issues for the newly formed company, which will compete with deeper peers.

The substantial amount of the direct debt incurred by DirectTV and Time Warner in 2015 has led to the contracting of subdivisions leaving the new company for substantial credit to AT&T.

“We expect the stock to have a high debt load and uncertainty surrounding key strategic questions,” MoffettNathanson analyst Michael Nathanson told clients in a note. “In addition, we are concerned about the additional pressure on WBD from AT&T’s shareholding, and would like to sell 71% of the shares due to other investment details.”

While his “neutral” rating breaks down with the overall bullish sentiment on Wall Street, it is a useful salt for every company’s investors to digest.

Tightens focus on AT&T

Questions for AT&T shareholders are based on both the new company and AT&T, which currently has low debt.

For the former, credit and decision-making ability to compete with established streaming giants. Many guys who own their AT&T will be worried about leaving. For the latter, the equation seems more favorable.

“From the AT&T side, removing Warner Bros. will reduce distraction for the company,” AllYourScreens’ Ellis said. “Executives don’t really have a handle on the TV / streaming business and CEO John Stanky spent a lot of time guessing WB management a second time. In many ways, this deal is a great opportunity for AT&T.”

There was also a clear focus from laser focus management on efficient areas.

“We are at the dawn of a new era of connectivity, and today marks the beginning of a new era for AT&T,” said AT&T CEO John Stanky. “Once this transaction is completed, we look forward to investing at record levels in our 5G and fiber development areas as we strive to become the best broadband company in the United States. Focus on returns for shareholders.”

So far this opinion seems to be favorable to investors as stocks are accelerating and gaining overall confidence in the company’s ability to invest with healthy balances and safe dividends. Analysts also praised the firm focus.

“AT&T, a highly communications-focused company, now looks like Verizon (VZ), which, over the years, has been declining to distract from the satellite video business’s distractions and revenue drag and capital obligations of the Warner / HBO media businesses. .

In the end, when the deal finally comes, the positive feeling for everyone grows. However, considering the number of remaining question marks, healthy AT&T seems to be the most attractive option of the two.

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