Discovery to Merge with AT&T's WarnerMedia



Discovery $DISCA is the latest addition to my portfolio and they are now going to merge with WarnerMedia owned by AT&T $T .


🤝 The deal is a Reverse Morris Trust Transaction, in other words, 𝘼𝙏&𝙏 𝙬𝙞𝙡𝙡 𝙨𝙥𝙞𝙣𝙤𝙛𝙛 𝙒𝙖𝙧𝙣𝙚𝙧𝙈𝙚𝙙𝙞𝙖 𝙬𝙝𝙞𝙘𝙝 𝙬𝙞𝙡𝙡 𝙩𝙝𝙚𝙣 𝙢𝙚𝙧𝙜𝙚 𝙬𝙞𝙩𝙝 𝘿𝙞𝙨𝙘𝙤𝙫𝙚𝙧𝙮. This is done to avoid taxes. 100% of Discovery shares will be converted into shares of the new company with Discovery shareholders owning 29% of it. $43 Billion of the debt of AT&T will be assumed by the new company. David Zaslav, CEO of Discovery, will be the CEO of the new company.


📺 WarnerMedia owns Warner Bros Studios, DC, CNN, HBO,... while Discovery owns mostly factual TV networks such as Discovery Channel and the Food Network. This deal is going to create a 𝙈𝙚𝙙𝙞𝙖 𝙜𝙞𝙖𝙣𝙩 hoping to compete with Netflix $NFLX , Disney $DIS and ViacomCBS $VIAC .


𝙁𝙧𝙤𝙢 𝙩𝙝𝙚 𝙥𝙤𝙞𝙣𝙩 𝙤𝙛 𝙫𝙞𝙚𝙬 𝙤𝙛 𝙖𝙣 𝘼𝙏&𝙏 𝙨𝙝𝙖𝙧𝙚𝙝𝙤𝙡𝙙𝙚𝙧, this deal is good since it will deleverage the company and allow them to focus on telecommunications but they will also cut their dividends and AT&T is known to be a dividend aristocrat.


🌎𝙁𝙤𝙧 𝘿𝙞𝙨𝙘𝙤𝙫𝙚𝙧𝙮, the risk is that they are no longer going to be a 100% factual company, bringing additional costs. But having HBO in their portfolio can help them advance their own streaming platform better.


Watch the full video on YouTube:

https://www.youtube.com/watch?v=8Is0JDx_ffI&list=UUPO3uUyoXSaFWG-Ldq1mqEQ&index=2


Full analysis of deal:

https://ishfaaqpeerally.teachable.com/courses/662813/lectures/32475061


 

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