AT&T has confirmed that the mechanism for its separation of WarnerMedia will be a spin-off, followed by the subsequent combination of WarnerMedia with Discovery.
The transaction itself was announced in May of last year, but the mechanism — a stock split or a spin-off — had not been confirmed, and on the company’s most recent quarterly call, analysts were keen to know which it would be. AT&T will receive $43 billion in a combination of cash and other considerations; the transaction is expected to close in the second quarter of 2022.
AT&T shareholders will receive stock representing about 71% of the new company and existing Discovery shareholders will hold about 29% of it.
After the close of the transaction, the WarnerMedia-Discovery stock is expected to trade under the symbol WBD.
“In evaluating the form of distribution, we were guided by one objective — executing the transaction in the most seamless manner possible to support long-term value generation,” said AT&T CEO John Stankey in a statement. “We are confident the spin-off achieves that objective because it’s simple, efficient and results in AT&T shareholders owning shares of both companies, each of which will have the ability to drive better returns in a manner consistent with their respective market opportunities. … We are confident both equities will soon be valued on the solid fundamentals and attractive prospects they represent.”
The spin-off of WarnedMedia and the accompanying influx of cash to AT&T will come just about the time that the company is eyeing a mid-year ramp-up of midband spectrum deployment for 5G. It also plays into the company’s overall strategy to become a “more focused business” in 2022, which Stankey has spoken about previously at a Citi conference.
AT&T’s focus, Stankey said, is “to be a great connectivity company” and move its media assets into a stronger position to “truly become a global media distribution asset. … It’s going to be a great unlock and a great opportunity for shareholders of this company as we move through this year.”
He added later, “We’re going to be a more focused business,” saying that AT&T is working on making sure its remaining assets as “sized and structured appropriately.”
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