AT&T, Inc. (NYSE: T) announced details of its plans for wiping its hands of WarnerMedia as it combines with Discovery, Inc (NASDAQ: DISCA, DISCB, DISCK; see “AT&T to spin out WarnerMedia in combination with Discovery, Inc.”). The service provider’s board of directors has decided to spin off all of AT&T’s interest in WarnerMedia to AT&T’s existing shareholders in a pro rata distribution. The spinoff will occur just before WarnerMedia merges with Discovery, an event expected to occur in the second quarter of this year.
The all-stock, Reverse Morris Trust transaction, which remains subject to the usual closing conditions, will see AT&T receive $43 billion (subject to working capital and other adjustments) in a combination of cash and other consideration, and AT&T’s shareholders will receive stock representing approximately 71% of the new company, Warner Bros. Discovery, Inc. (WBD), on a fully diluted basis. Existing Discovery shareholders will own the rest of WBD, which will trade on NASDAQ Global Select Market under the symbol WBD. Each AT&T shareholder, on the day the deal closes, will receive, on a tax-free basis, an estimated 0.24 shares of the new WBD common stock for each share of AT&T common stock they hold. AT&T shareholders will continue to hold the same number of shares of AT&T after the transaction closes.
“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. “We are confident the spinoff 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 believe that the remaining AT&T and the new WBD are two equities that the market will want to own and the markets to support those equities will develop,” Stankey added. “Rather than try to account for market volatility in the near-term and decide where to apportion value in the process of doing an exchange of shares, the spinoff distribution will let the market do what markets do best. We are confident both equities will soon be valued on the solid fundamentals and attractive prospects they represent.”
AT&T reiterated that it will use proceeds from the transaction to deleverage and better position itself for fiber and 5G mobile network deployments.
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