Discovery Shares Jump 16% As Excitement Builds Around WarnerMedia Deal

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Top Line

Shares of media conglomerate Discovery rose 16% on Friday, prompting investors to expect a massive $43 billion merger with AT&T’s WarnerMedia, which removed several regulatory hurdles and led to closures over the next few months. are supposed to.

important facts

Shares of Discovery rose 16% on Friday as both analysts and investors are increasingly excited about the company’s upcoming merger with AT&T’s entertainment arm WarnerMedia.

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The $43 billion deal, which is set to close in the first half of 2022, will combine well-known brands such as HBO, CNN, Animal Planet and Food Network under a new publicly traded company called Warner Bros.

The Warner-Discovery deal cleared several antitrust hurdles, including recent regulatory approval from the European Commission and a favorable decision from the Internal Revenue Service.

AT&T CEO John Stankey told the Citi Investor Conference earlier this week that the WarnerMedia spin-off and merger with Discovery is proceeding as planned, while also indicating that the deal may come sooner than expected. may be closed.

Bank of America analysts on Friday upgraded Discovery shares to a “buy” rating, predicting that the upcoming merger has the potential to create a “global media powerhouse” and a great deal of unpredictability for investors.

The firm is merging some of its best streaming properties—namely HBO Max and the new Discovery+—on the new entity and emerging as an established competitor to other streaming giants like Netflix and Disney+.

Main background:

AT&T and Discovery First announced a $43 billion merger in May 2021, announcing that the consortium would create “a leading, standalone global entertainment company.” AT&T plans to wind down WarnerMedia and hand over operational control to Discovery, meaning the telecom giant will exit the entertainment and streaming business entirely. Discovery CEO David Zaslav will lead the new company along with the management teams of both companies. AT&T shareholders will own 71% of the newly combined company, while Discovery shareholders will own 29%.

Big numbers: $52 billion

That’s how much revenue Warner Bros. Discovery is projected to have in 2023, at least $3 billion in projected cost savings annually for the newly formed company.

Important Quote:

“As a combined entity, we believe Warner Bros. Discovery has the potential to become the most dynamic global media company,” Bank of America analysts wrote Friday. “The risk/reward for Discovery is extremely favorable.”

Shocking fact:

Shares of both AT&T and Discovery have largely failed to gain momentum, despite unveiling a planned merger. Since the announcement in May 2021, the shares are down 17% and 24%, respectively.

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