-=AT&T(T) to merge WarnerMedia with Discovery (DISCA)

 

AT&T's WarnerMedia and Discovery (DISCA) creating standalone company by combining operations to form new global leader in entertainment

Under the terms of the agreement, which is structured as an all-stock, Reverse Morris Trust transaction, AT&T would receive $43 billion (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia's retention of certain debt, and AT&T's shareholders would receive stock representing 71% of the new company; Discovery shareholders would own 29% of the new company. The Boards of Directors of both AT&T and Discovery have approved the transaction.

The companies expect the transaction will create substantial value for AT&T and Discovery shareholders by: Bringing together the strongest leadership teams, content creators, and high-quality series and film libraries in the media business. Accelerating both companies' plans for leading direct-to-consumer (DTC) streaming services for global consumers. Uniting complementary and diverse content strengths with broad appeal - WarnerMedia's robust studios and portfolio of iconic scripted entertainment, animation, news and sports with Discovery's global leadership in unscripted and international entertainment and sports. Forming a new company that will have significant scale and investment resources with projected 2023 Revenue of approximately $52 billion, adjusted EBITDA of approximately $14 billion, and an industry leading Free Cash Flow conversion rate of approximately 60%. Creating at least $3 billion in expected cost synergies annually for the new company to increase its investment in content and digital innovation, and to scale its global DTC business.

=Scripps Networks Interactive (SNI) to be acquired by Discovery Communications (DISCA)

Scripps Networks Interactive agrees to be acquired by Discovery Communications (DISCA) in a cash-and-stock transaction valued at $14.6 bln, or $90/share:

Together, Discovery and Scripps will offer a complementary and dynamic suite of brands. The combined company will produce approximately 8,000 hours of original programming annually, be home to approximately 300,000 hours of library content, and will generate a combined 7 billion short-form video streams monthly, demonstrating its commitment to delivering content as a top short-form provider.

• Scripps shareholders will receive $90 per share under the terms of the agreement, comprised of $63.00 per share in cash and $27.00 per share in Class C Common shares of Discovery stock, based on Discovery's Friday, July 21 closing price. The stock portion will be subject to a collar based on the volume weighted average price of Discovery Class C Common Shares over the 15 trading days ending on the third trading day prior to closing. Scripps shareholders will receive 1.2096 Discovery Class C Common shares if the Average Discovery Price is below $22.32, and 0.9408 Discovery Class C Common shares if the Average Discovery Price is above $28.70. If the Average Discovery Price is greater than or equal to $22.32 but less than or equal to $28.70, Scripps shareholders will receive a number of shares between 1.2096 and 0.9408 equal to $27.00 in value. If the Average Discovery Price is between $22.32 and $25.51, Discovery has the option to pay additional cash instead of issuing more shares.
• This purchase price implies a total transaction value of $14.6 billion, including the assumption of Scripps' net debt of approximately $2.7 billion. Post-closing, Scripps' shareholders will own approximately 20% of Discovery's fully diluted common shares and Discovery's shareholders will own approximately 80%. This calculation is based on the number of Discovery shares outstanding today.
• The combination is expected to create significant cost synergies, estimated at approximately $350 million. The deal is expected to be accretive to Adjusted Earnings per Share and to Free Cash Flow in the first year after close.

=Scripps Networks Interactive (SNI) and Discovery Communications (DISCA) in merger talks

Shares of Scripps Networks Interactive (SNI) and Discovery Communications (DISCA) both jumped in the extended session Tuesday following a report of a possible merger. Scripps shares surged 10% to $74 while shares of Discovery rallied 9.4% to $28.50 after hours. The moves followed a Wall Street Journal report that Scripps and Discovery are in talks to combine companies, a tie-up that had been discussed back in 2014 but later abandoned, according to people familiar with matter.