The Spinco Financing Agreements allude to debt totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". However, Discovery is an expert in international content, with a presence across 220 markets, and expertise adapting its unscripted content to many other languages. Discovery a Buy? ), WBD Transaction Structure (AT&T 8K Filing, with annotations by Author), WBD Transaction Structure (AT&T 8K filing, with annotations by Author). These offers do not represent all available deposit, investment, loan or credit products. NFLX also held $6 billion in cash. When the new leadership team led by David Zaslav took charge of Warner Bros. Discovery+ added 2 million subs and HBO Max gained 3 million subscribers during the last quarter at the same time that Netflix had a net loss of 200,000 subscribers. 2023 GOBankingRates. (I update this score on at least a quarterly basis for readers.). Could AT&T Stock Beat the Market in 2023? Please try again later. With the 5G transition in full swing, the company can't afford to be distracted with the streaming media wars, paying down debt, and maintaining the dividend all at once. Visit a quote page and your recently viewed tickers will be displayed here. That sale is being blamed for the slow pace of renewals for some of The CW's shows, including the Warner Bros.-ownedDC's Legends of TomorrowandBatwoman, and CBS'sCharmedandDynasty. To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. The company previously expected $3 billion in annual run-rate synergies from the merger, but during the last earnings call, CFO Wiedenfels stated the $3 billion target might be conservative. On Feb. 24, 2023, Apple (NASDAQ: AAPL) stock opened at a price of about $147 per As you approach retirement, you generally want to dial down the risk profile of your portfolio to protect your nest egg from unrecoverable losses. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. Bill Peters is a Los Angeles-based MarketWatch reporter who covers earnings. So why did a spinoff of WarnerMedia make sense as a key step in the combination? AT&T and Discovery on Monday announced that they will merge their media assets in a megadeal that creates a stronger rival to Walt Disney and Netflix amid global An SEC filing last March, just prior to the merger, revealed that Discovery forecasts revenue from its U.S. linear TV business will decline by 4% per annum through The new streaming behemoth will have a huge library of 200,000-plus hours of content, from Warner Bros. Studios, HBO and MBO Max, The Turner channels (TNT, TBS, CNN), as well as Discovery's comprehensive portfolio of unscripted content. These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. Year-to-date, Warner Bros. Consequently, I rate WBD as a HOLD. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. Warner Bros. In 1989, Warner merged with Time Inc., publishers of Time and Life magazines, who were almost immediately forced to buy Warner Bros. after a hostile takeover attempt by Paramount (who, funny enough, wanted Time, not Warner). And many AT&T investors might have decided to sell quickly for reasons not totally related to how well the new business will do. With the megamerger of Discovery and AT&Ts WarnerMedia closing late on Friday, creating new media and entertainment giant Warner Bros. That Considering the latest disclosure of WBD transaction details (e.g. pertaining to the WarnerMedia spinoff, the telecom giant also submitted a, to the SEC, covering every "nitty-gritty" detail from pro-forma historical WarnerMedia statement of operations that were not previously available, all the way down to key terms of the merger agreement with. ) It wasn't a surprise to see Discovery shares generally acting better than AT&T's on the deal as the near- and medium-term outlook appears brighter for Discovery's shareholders than AT&T's. Discovery stock. Discovery have tumbled 45.2% over the past 12 months. When you buy stock, you're essentially buying a tiny piece of the company it represents. The new entity will focus on streaming services. After the next few quarters, investors will have a better sense of how things are playing out and whether the stock is one to hold onto. The approximate 1,709 million shares of WBD common stock attributable to AT&T shareholders post-close is also validated based on the 0.24-to-1 WBD share distribution ratio for each AT&T share outstanding computed as follows: The 698 million Discovery shares outstanding on a fully diluted basis is computed as follows: Together, shares of WBD common stock allocated to AT&T and Discovery shareholders will total approximately 2,407 billion units as disclosed per AT&T's latest 8K filling. The estimated transaction value takes into consideration the closing price of $25.37 per share for Discovery Series A common stock as of March 9th, multiplied by assets separated, considerations paid, regulatory approvals received, etc.) If content is king, an argument can be made that WBD takes the crown. It has been awful time for investors in media company Warner Bros. Lawrence Nga has no position in any of the stocks mentioned. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. AT&T has applied an exchange ratio of 2.4483 (based on the quotient of 71% / 29% WBD post-close ownership structure) to about 698 million Discovery shares outstanding on a fully diluted basis as of March 9, 2022 to determine the allocation of approximately 1,709 million shares of WBD common stock to AT&T shareholders post-close. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. Under the terms of the deal, which is structured as an all-stock transaction, AT&T would receive $43 billion in cash and debt with its shareholders controlling 71% of The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. Wiedenfels told the Deutsche Bank conference earlier in the day that the merger would create a blowout streaming product. Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. Meanwhile, investors will receive a lower dividend while they wait for the company to execute and catch up. To make the world smarter, happier, and richer. The Hollywood Reporter is a part of Penske Media Corporation. The strongest case for WBD is the massive supply of content associated with WarnerMedia. Making the world smarter, happier, and richer. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. Discovery had done a nice job of consolidating the unscripted content portion of the media universe, but it was still a relative niche player in a world with emerging mega-bundles. By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. But it said that the ongoing reorganization, expected to be largely complete by the end of next year, could result in additional impairments above the revised estimates.. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. Making the world smarter, happier, and richer. We had previously estimated about 2.4 billion WBD shares outstanding post-close according to AT&T's stock dividend structure of 0.24 WBD shares for each AT&T share. Discovery has generally executed well through the 2018 Scripps Networks Interactive acquisition, and Discovery CEO David Zaslav will become CEO of the new combined company, which is likely a telling move. What's been going on and is now the time to sell out of the stock? Copyright 2023 Market Realist. These issued Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. Discovery CEO David Zaslav Zaslav hasnt been shy in making changes that align with the Warner Bros. But if I take a step back here and just look at, call it, the past 15 months for WarnerMedia sort of as a carve out-group, we're looking at more than $40 billion of revenue and really virtually no free cash flow. As discussed in detail in our last coverage, AT&T will spinoff 100% of its current interest in WarnerMedia post-close. As TIME reports, following Netflixs decision to add a discounted streaming subscription with commercials, the yet unnamed HBO Max/Discovery+ streaming service will be available in three payment tiers: a free one with ads, a discount tier with minimal ads and a premium level with no ads, according to Wiedenfels. Warner Bros. In our last coverage on the upcoming WBD transaction and its implications for AT&T post-close, we had provided a detailed estimate on WBD's upside potential attributable to AT&T shareholders post-close. This array of content serves to attract and retain subscribers. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Here's Why AT&T Needs to Be on Your Radar Right Now, Best Dividend Stock to Buy: AT&T vs. Ford vs. Intel, 2 Growth Stocks That Can Turn $250,000 Into $1 Million by 2030, Billionaire Investor Bill Ackman Is Raking In $97 Million In Annual Dividend Income From These 2 Stocks, 1 Bargain-Basement Warren Buffett Stock Down 78% to Buy Before It Starts Soaring, 3 No-Brainer Stocks to Buy With $50 Right Now, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. The companies are also forecasting annual cost synergies of $3 billion. 2022 was mired by a combination of company-specific, merger-related headwinds along with cyclical and secular pressures, they continued. Upon closing, Magallane, Inc. Spinco will merge with "Drake Subsidiary, Inc.", the wholly owned "merger subsidiary" of Discovery's to create WBD. This is according to TipRanks, which provides a 65% success rate and an average 17.6% annual return for my articles. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. All rights reserved. Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. On Friday, Discovery shareholders formally approved the mega-combination of the factual and lifestyle media powerhouse Discovery with AT&Ts entertainment arm. ET. AT&Ts WarnerMedia unit and Discovery Inc said on Friday that the two firms have completed the merger. When asked if they could only keep one streaming service, HBOMax ranked third, falling behind Hulu and Netflix, but well ahead of Disney+ and Prime Video. Apr 11, 2022 1:58 PM EDT. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. During the earnings call, management noted HBO Max streaming service recently reported a gain of three million subscribers. It had been up as much as 9% in morning trading but has been in a In his first earnings report since an April merger created one of the largest media companies in the U.S., on Aug. 4 Warner Bros. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. AT&T Ex-Distribution Trading - AT&T shareholders can engage in "Ex-Distribution Trading" during the two-way trading period if they wish to only sell their right to AT&T RemainCo and retain their stock dividend pertaining to the WBD transaction. Upon completion of the merger, each Spinco common stock issued under transaction step #4 and distributed to existing AT&T shareholders as of record date under transaction step #5 will automatically convert into 0.24 shares of WBD common stock. There was an unknown error. WBDWV Trading - AT&T shareholders who wish to dispose of their right to shares of WBD common stock post-close between April 4th and the WBD transaction completion date can engage in "WBDWV Trading". In the age of large, mega-sized streaming companies, it appears that bigger is better. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. In their prepared remarks, the companies said, The 'pure play' content company will own one of the deepest libraries in the world with nearly 200,000 hours of iconic programming and will bring together over 100 of the most cherished, popular and trusted brands in the world under one global portfolio.. Get advice on achieving your financial goals and stay up to date on the day's top financial stories. I have no business relationship with any company whose stock is mentioned in this article. At the time In early Monday trading, the shares of the Discovery CEO David Zaslav will run the merged giant, with Discovery CFO Gunnar Wiedenfels serving as the new companys CFO. Prior to WBDs quarterly report announcement, Barrons reported that analysts at Goldman Sachs reinstated a buy rating and price target of $22 on Warner Bros. There is no doubt that WBD will possess a formidable content portfolio. SPX, Management projects the combined company will generate $52 billion in revenue. Asked about the risk of future dividend cuts, Desroches said that the dividend is not only safe, but its size gives the company financial flexibility. If you want full access to our Model Portfolio and all our current Top Picks, feel free to join us for a 2-week free trial at High Dividend Opportunities. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. I am not receiving compensation for it (other than from Seeking Alpha). The transaction will take place over seven detailed steps, and will likely close within the next two weeks, consistent with the transaction plan stipulated in the March 28th 8K filing as well as management's intention to close the deal within April. An SEC filing last March, just prior to the merger, revealed that Discovery forecasts revenue from its U.S. linear TV business will decline by 4% per annum through 2025, while expenses are expected to accelerate. Market Realist is a registered trademark. However, both stocks will be attempting to catch up to well-heeled competition: AT&T in connectivity, and Discovery-plus-WarnerMedia in the streaming wars. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run. I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. Discovery. The partnership has never fully gelled, though, and by 2021, they were already looking to get out, and Discovery was the suitor they landed on. Learn More. The merger with Discovery has the above-stated benefits for AT&T, including significantly reduced debt. Discovery's Stock, 2 Growth Stocks That Can Turn $250,000 Into $1 Million by 2030, Billionaire Investor Bill Ackman Is Raking In $97 Million In Annual Dividend Income From These 2 Stocks, 1 Bargain-Basement Warren Buffett Stock Down 78% to Buy Before It Starts Soaring, 3 No-Brainer Stocks to Buy With $50 Right Now, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Motley Fool Issues Rare All In Buy Alert, Copyright, Trademark and Patent Information. Net income for the quarter hit $456 million, with EPS of $0.69 cents. The resultant company, Warner Bros. Discovery stock at a time when those shares dont fully reflect the value that we see long-term for the combined company.. WBD Transaction Structure (AT&T 8K filing, with annotations by Author. ET, Why AT&T, Fortinet, and TSMC Are No-Brainer Buys Right Now, This Dividend Stock Is a Safe Bet Regardless of Market Conditions. Looking for a helping hand in the market? They added that advertising trends in January appeared to have improved from December. Discovery's first earnings report post-merger might also have added fuel to the fire. Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. we also think that one of the big opportunities here is going to be churn reduction. Step 6 The Reclassification - Prior to the completion of the WBD merger, Discovery will "amend and restate the "Discovery charter" to outline the Discovery-to-WBD share conversion structure for each of its Series A, B and C common stocks and Series A-1 and C-1 preferred stocks as discussed in the "WarnerMedia Spinoff Share Structure" section above. People may receive compensation for some links to products and services on this website. Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. And right or wrong, management has made a decision to invest a lot of the incoming funds into a number of investment initiatives. Management also emphasized that the company will take a circumspect approach to content spend. The spinoff and dividend cut is probably the right long-term move for AT&T, as it will offload some $43 billion in debt to the new WarnerMedia company. has been completed,direct to consumer (DTC)losses peaked in22 with a path to breakeven in24 and the cyclical headwinds should abate as macro conditions improve.. AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. The new company will be able to compete in the streaming industry. I have no business relationship with any company whose stock is mentioned in this article. Warner Bros. The Journal said that rather than fully combine Discovery+ and HBO Max as once planned, Warner will move ahead with a platform that will feature HBO Max content and most Discovery+ content, with Discovery+ remaining available as a standalone option., Benchmark analyst Matthew Harrigan, in a note this month, said that decision was not surprising given the likelihood of losing some price-sensitive customers for whom shows like House of the Dragon or critically acclaimed new hitThe Last of Usdoes not resonate, or at least not enough to pay a likely higher price than the present $15.99/$9.99 (with ads) for HBO Max.. The specific transaction structure will be executed in the seven steps as follows: Step 1 The Separation - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, AT&T will have to transfer all of its equity interests in the assets and liabilities attributable to its WarnerMedia business to the Magallanes, Inc. Spinco. After last years messy mega-merger, executives at Warner Bros. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. Among the reports that came out of the first week of Warner Bros. The same group is repeating its act again, albeit on a bigger deal. The Motley Fool recommends Discovery (C shares). Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. Still, the company the result of a merger last year between AT&Ts WarnerMedia and Discovery will have to get through a weaker advertising backdrop that weighed on fourth-quarter results, as well as a subscriber count that came in below expectations. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. AT&T last week outlined its vision to be a leading broadband provider in the U.S. following the WarnerMedia transaction. I wrote this article myself, and it expresses my own opinions. Invest better with The Motley Fool. The new management is trying hard to turn around the ship. NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. If you have taken a look at AT&T's latest 8K filling dated March 28th, you would notice that the filing registrant is "Magallanes, Inc.". Discovery is now a buy, hold or sell. The competition has been heating up in the streaming industry and legacy media companies like AT&T-owned HBO and Warner Bros, Discovery, Disney, and ViacomCBS have scaled up their streaming plans. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. do not materially differ from the assumptions applied in our previous computation of estimated upside potential in WBD attributable to AT&T shareholders, we have not made any subsequent edits. The management team has plenty of experience executing mergers. My sister has always struggled with money and drugs. I could be characterized as a safety first investor. Under the terms of the deal, WarnerMedia retained $43 billion in debt. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: Estimated Consideration to AT&T for WarnerMedia Assets (AT&T Form 8K filing dated March 28, 2022, pg. Step 3 Special Cash Payment - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, the Magallanes, Inc. Spinco will make a "Special Cash Payment" to AT&T totaling $33 billion, which represents the estimated fair value of AT&T's equity interest in total WarnerMedia assets and liabilities to be transferred to Spinco as discussed in transaction step #2. The consensus 12-month price target of the five analysts rating the stock is $37.25. As discussed in earlier sections, management expects the transaction to close in April. Discovery's share price when the new company began trading earlier this year. Warner Bros. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. Under WBDWV Trading, AT&T shareholders will be able to sell their right to WBD shares distributed to them as a result of their AT&T share ownership as of the record date through the temporary Nasdaq ticker "WBDWV" beginning April 4th. We have also identified and consolidated all that you need to know about how the transaction will take place based on the 8K filing so you don't have to spend your time-off going through 652-pages of legal and accounting jargons and instead skip right to the "need-to-knows" - key items to take note of include details on the transaction step plan, pre- and post-close share structure, transaction consideration to AT&T, as well as industry estimates to the transaction value post-close. Let the power of quality research drive your investment convictions. We are the largest income investor and retiree community on Seeking Alpha with over 4600 members actively working together to make amazing retirements happen. The gap period will be at least a week (but complete within April according to the intended closing period proposed by management), considering AT&T will be required to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock as of record date at least five business days prior to the actual stock dividend distribution. More importantly, we believe 4Q is an opportunity for management to turn the page to 2023 and reset the narrative, BofA analysts said in a note last month. Ahead of the fourth-quarter earnings, some analysts said the results would present an opportunity for management to reframe the companys path forward. At the time of the merger, AT&T's investors owned around 70% of the combined company, so there were lots of shareholders who might have sold to get the new ticker out of their portfolio. Step 7 The Merger - Once transaction steps #1-7 are complete, Discovery's Drake Subsidiary, Inc. merger subsidiary will merge into Magallanes, Inc. Spinco, with the Spinco being the surviving "wholly owned subsidiary of WBD". Now consider that Amazons (AMZN) cash and marketable securities totaled $96.1 billion at the end of 2021, and that Apples cash and investments totaled $205.6 billion at the end of 1Q22. The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. Investors had high hopes for Warner Bros. with the stock up over 60% year to date, reversing losses from 2022 Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate. There is meaningful churn on HBO Max, much higher than the churn that we have seen. Hogwarts Legacy launched on Feb. 10. Read More About: AT&T Warner Bros. on companies with competitive advantages and strong balance sheets. WBD was trading at $24.88 before markets closed for the holiday weekend. And given that Q1 performance and previously unplanned projects in sight, I currently estimate the WarnerMedia part of our profit baseline for 2022 will be around $500 million lower than what I had anticipated. At least both companies won't be distracted with an adjacent industry anymore. WBD was With the WarnerMedia spinoff fast approaching, AT&T (NYSE:T) has uploaded a series of press releases last week detailing how the transaction will take place. A merger rarely goes without hiccups, so while the dip in Warner Bros. The Motley Fool has a disclosure policy. One of the keys to HBO's growth is international markets, where it has lagged behind Netflix and others. Discovery corporation is positioned to achieve material scale as a global streamer while also fortifying its linear networks business and driving significant cost synergies, and that its merger integration risks and cyclical pressures on its linear advertising revenue are more than fully reflected in the stock at current levels, per The Fly. Please disable your ad-blocker and refresh. May 17, 2021 2:01 PM EDT. Founded by four brothers in 1923, Warner Bros. is a giant in the film industry, but has changed hands more time than most fans can count. The thinly traded shares (ticker: DISCB) that are 95% owned by media mogul and Discovery board member John Malone traded Tuesday at $68.88, down $1.02. Cost basis and return based on previous market day close. At the end of 2021, the pro forma debt for WBD was over $56 billion. The Motley Fool has a disclosure policy. Shop Pay is an innovative payment solution developed by Shopify. Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. Bret Kenwell. That, plus the lower dividend, will allow AT&T to focus on building out its 5G network and its fiber footprint over the next few years. I have no business relationship with any company whose stock is mentioned in this article. Earlier this year, the merger of AT&T 's ( T -0.57%) WarnerMedia with Discovery ( DISC.A) ( DISC.B) ( DISCK) was given the green light by U.S. regulators. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more.

Vz61 3d Printed, Safeguard Dewormer For Chickens, Subtle Signs Your Fwb Likes You, Bossier City Obituaries, Articles D