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 .
๐ค The deal is a Reverse Morris Trust Transaction, in other words, ๐ผ๐&๐ ๐ฌ๐๐ก๐ก ๐จ๐ฅ๐๐ฃ๐ค๐๐ ๐๐๐ง๐ฃ๐๐ง๐๐๐๐๐ ๐ฌ๐๐๐๐ ๐ฌ๐๐ก๐ก ๐ฉ๐๐๐ฃ ๐ข๐๐ง๐๐ ๐ฌ๐๐ฉ๐ ๐ฟ๐๐จ๐๐ค๐ซ๐๐ง๐ฎ. 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.
๐บ 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 ๐๐๐๐๐ ๐๐๐๐ฃ๐ฉ hoping to compete with Netflix $NFLX , Disney $DIS and ViacomCBS $VIAC .
๐๐ง๐ค๐ข ๐ฉ๐๐ ๐ฅ๐ค๐๐ฃ๐ฉ ๐ค๐ ๐ซ๐๐๐ฌ ๐ค๐ ๐๐ฃ ๐ผ๐&๐ ๐จ๐๐๐ง๐๐๐ค๐ก๐๐๐ง, 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.
๐๐๐ค๐ง ๐ฟ๐๐จ๐๐ค๐ซ๐๐ง๐ฎ, 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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