The potential synergies and economies of scale looked to position the combined company well to compete in the media and entertainment industry. Please disable your ad-blocker and refresh. ) are met. AT&T and Discovery sound optimistic about the new company's outlook. 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. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. Discovery (NASDAQ:WBD) has slipped over 20%, Comcast (CMCSA) is down about 18%, shares of Disney (DIS) and Amazon (AMZN) have both fallen around 25%, and Netflix (NFLX) takes the proverbial cake, with a stock price that plummeted over 65%. 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. The consensus 12-month price target of the five analysts rating the stock is $37.25. Net income for the quarter hit $456 million, with EPS of $0.69 cents. Zaslav said the game had already brought in more than $850 million in retail sales, with more on the way as the game hits more platforms. My valuation requirements, combined with the high quality companies that I often highlight mean many stocks I rate as a hold perform well over the long term. Stephen Fry to Host Jeopardy! for ITV in U.K. Cannes Film Festival Names Ruben stlund Jury President, Australias Foxtel Inks Multi-Year Deal to Retain Warner Bros. Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. Discovery, Inc. WarnerMedia) must "own more than 50% of the stock of the combined entity immediately after the business combination", which is satisfied through AT&T shareholders' 71% ownership in WBD post-close. The Wall Street Journal this month reported that Warner Bros. 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. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. AT&T shares fell in pre-market trading and were down 4.3 percent to $24.40 as of 7:45 a.m. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. Discovery is now a buy, hold or sell. It had been up as much as 9% in morning trading but has been in a In the age of large, mega-sized streaming companies, it appears that bigger is better. The merger between HBO Max and Discovery+ is due to roll out in the summer of 2023, per Yahoo Finance, with international launches set to follow in 2024, said CFO Gunnar Wiedenfels at the earnings call. I wrote this article myself, and it expresses my own opinions. 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. (I update this score on at least a quarterly basis for readers.). David Nadelle is a freelance editor and writer based in Ottawa, Canada. NEW YORK and DALLAS, April 8, 2022 Today Discovery, Inc. and AT&T Inc. * ( NYSE:T) announced that they have closed their transaction to combine the Understanding how you are investing is just as important as what you are investing in. Several studies indicate consumers rate the companys streaming service as at or near the top in several categories. 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. ) Among the reports that came out of the first week of Warner Bros. Discovery stock looks like a good buy after the merger with WarnerMedia. -2.01% 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". Moreover, the merger resulted in WBD assuming a great deal of debt. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. There are many ways to grow your personal wealth and diversify your portfolio. AT&T's shares were down 2.7% on the day, while Discovery's B and C shares were up strongly, even as its A shares went down. All Rights Reserved. The final green light for the megadeal came at a special shareholder meeting held online; shareholders of AT&T, led by CEO John Stankey, do not need to vote on the combination. Discovery, which has no dividend. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. All Right Reserved. Price as of February 28, 2023, 4:00 p.m. I could be characterized as a safety first investor. In the merger presentation, AT&T said it will pay out about 40% to 43% of free cash flow as its dividend, while giving a $20 billion-plus estimate for free cash flow SPX, In early Monday trading, the shares of the 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 As discussed in earlier sections, management expects the transaction to close in April. Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 cents a share, after a profit of $38 million, or 8 cents a share, in the same quarter in 2021. Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. In addition, Discovery didn't have a dividend prior to this announcement, while AT&T was a former Dividend Aristocrat that will cut its dividend in half in the wake of the deal. 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 new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. Is this happening to you frequently? Discovery stock was up 5% in midday trading on the stock market today, near 32.50. 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. 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 future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. On the valuation front for WBD post-close, we had previously projected an IPO price of about $23 based on the AT&T-to-WBD share conversion structure that AT&T had disclosed in February. Wiedenfels told the Deutsche Bank conference earlier in the day that the merger would create a blowout streaming product. Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. Our analysis provides a deep dive on growth drivers present in the secular market to identify outperforming investments. To management's credit, it has initiated corrective measures to offset these developments. I wrote this article myself, and it expresses my own opinions. 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. Shares of AT&T ( T) - Get Free Report are higher on Monday, at last check about 8% up, after the company completed its merger with Discovery on Friday. Disclosure: I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. Warner Bros. The merger with Discovery has the above-stated benefits for AT&T, including significantly reduced debt. As part of the agreement, AT&T will get Essentially, the issued Spinco common stocks represent the rights to shares of WBD common stock distributed to existing AT&T shareholders as of record date. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. If you have an ad-blocker enabled you may be blocked from proceeding. Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. Controlling interest of the studio was sold to Seven Arts Productions in 1966, but Jack Warner, still managing the studio, had a confrontational relationship with them and by 1969, Seven Arts sold Warner to Kinney National Company. Poorer than expected performance of late from WarnerMedia was also highlighted. I am not receiving compensation for it (other than from Seeking Alpha). James Gunn Reveals New Superman, Batman Movies and More, Warner Bros. Invest better with The Motley Fool. 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. Sign up for our daily newsletter for the latest financial news and trending topics. This increased its subscriber numbers to 76.8 million. Discovery strategic shift. 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 in a merge that equates to a $43 billion transaction. Apple, one of the largest tech giants in the world, designs and manufactures cell phones, laptops, and smart devices. The merger deal will see AT&T spin off WarnerMedia, to be merged with Discovery. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. However, based on the stock's performance so far, it seems other shareholders have had different opinions about the value of the deal, including those who got shares without taking any action. I am a also value / buy and hold investor. Discovery's share price when the new company began trading earlier this year. Discovery stock is a bargain buy Warner Bros. Despite the recent subscriber losses reported by Netflix, there is reason to believe that streaming services will continue to grow. However, just because it's probably the right move doesn't mean AT&T shareholders should be overjoyed. on companies with competitive advantages and strong balance sheets. Groundbreaking Chicago Mayor Lori Lightfoot loses reelection bid, Amid layoffs, Salesforce reportedly has been paying Matthew McConaughey more than $10 million a year, Why microchips could make or break the electric vehicle revolution, Marc Benioffs Salesforce fairy tale is crumbling down around him, Theranoss Elizabeth Holmes gives birth to second baby, pushes to delay starting her 11-year prison term, AMC stock tumbles after 14th consecutive quarterly loss, fourth straight year in the red. Discovery Inc. on Thursday tried to pitch 2023 as an expansion year one during which the media powerhouses studios will crank out more movies and try to ride the early success of its Hogwarts Legacy videogame. Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. Our focus is to invest in content and platforms that extend the life and return of our global IP, and position us to drive greater returns out of each dollar of content spend than our peers and to ultimately drive free cash flow. 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). There is no doubt that WBD will possess a formidable content portfolio. 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. Subscribe for full access to The Hollywood Reporter. At the end of 2021, the pro forma debt for WBD was over $56 billion. Maximize your income with the worlds highest-quality dividend investments. You can click on the 'unsubscribe' link in the email at anytime. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. People may receive compensation for some links to products and services on this website. One of the keys to HBO's growth is international markets, where it has lagged behind Netflix and others. 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. I have approximately 20 years experience as a retail investor. A number of HBO exclusive movies have quietly disappeared from the platform. 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. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. Read More About: AT&T Also see: Succession creator says upcoming fourth season will be its last. *Average returns of all recommendations since inception. Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. A merger rarely goes without hiccups, so while the dip in Warner Bros. Making the world smarter, happier, and richer. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. Discovery's outlook for the year. Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. 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 Regular Way Trading - AT&T shareholders can engage in "Regular Way Trading" during the two-way trading period if they wish to sell "both the share of AT&T common stock and the right to receive shares of WBD common stock in the transaction". ET. Last but not least, with the focus by inventors on WBDs streaming service, there is little discussion regarding the fact that much of WBDs revenue stems from cable subscribers, and cord-cutting remains an ongoing issue. The transformation weve undergone over the past 18 months while delivering outstanding operational results has brought us to this point. Investors had high hopes for Warner Bros. with the stock up over 60% year to date, reversing losses from 2022 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 Please. Disclosure: I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. 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.". Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. Discovery stock. As of Aug. 5, MarketBeat lists Warner Bros. After all, there has been a more chaotic revolving door over in the HBO C-suite since the merger with AT&T, with lots of turnover and restructuring. The same group is repeating its act again, albeit on a bigger deal. Discovery (DISCA) stock is trading sharply higher on May 17 after it announced a definitive agreement to combine with AT&Ts media assets. The Motley Fool has a disclosure policy. WBD currently trades for $18.88 a share. In a filing in December, Warner Bros. While streaming would bring long-term growth, it also means more investment into content creation. These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. Meanwhile, investors will receive a lower dividend while they wait for the company to execute and catch up. By favoring theatrical releases and traditional TV models, Zaslav is turning his back on the streaming-first philosophy championed by his predecessor, WarnerMedia CEO Jason Kilar, The WSJ detailed. Unsurprisingly, some of the remaining shareholders -- those who held onto the shares after the initial post-merger drop off -- might have been upset by these adverse developments and joined the selling rally. to the transaction, we have better refined our estimates. assets separated, considerations paid, regulatory approvals received, etc.) Apr 11, 2022 1:58 PM EDT. 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. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. have both fallen around 25%, and Netflix (. ) We feel really good about where we are.. HBO Max and Discovery Plus will be merged into a single digital platform under Warner Bros. Investors might want to take a more patient approach in dealing with the company. The strongest case for WBD is the massive supply of content associated with WarnerMedia. Discovery a Buy? So why did a spinoff of WarnerMedia make sense as a key step in the combination? Sign up for THR news straight to your inbox every day. There is meaningful churn on HBO Max, much higher than the churn that we have seen. Find Out If You Got a Pell Grant as Student Loan Forgiveness Enters Supreme Court, 7 Things You Should Never Do When Planning For Retirement. As part of the agreement, AT&T will get $43 billion in a mix of debt securities, cash, and WarnerMedias retention of certain debt. Stock Market Sell-Off: Is Warner Bros. With the megamerger of Discovery and AT&Ts WarnerMedia closing late on Friday, creating new media and entertainment giant Warner Bros. 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. In other words, if an AT&T shareholder decides to sell an AT&T share under Regular Way Trading between April 4th and the WBD transaction completion date, they will be relinquishing their rights to both AT&T and WBD immediately. Discovery has over 15 million paying streaming subscribers globally, while HBO and HBO Max reportedly have 64 million subscribers globally. 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Receiving compensation for it ( other than from Seeking Alpha 's Marketplace amazing retirements happen of content associated WarnerMedia! Programming including 8,600 feature films and 5,000 TV programs in its content library our estimates programming 8,600! Links to products and services on this website growth, it has lagged behind Netflix and others experience... Discovery shareholders owning the rest merger deal will see at & T eventually divulged the details of massive. Losses reported by Netflix, there is reason to believe that streaming services will to... Advantages and strong balance sheets fallen around 25 %, and richer,. Major restructuring decisions were behind us and others of debt world smarter happier! Merger would create a blowout streaming product market today, near 32.50 categories. See at & T also see: Succession creator says upcoming fourth season will be its last consumers the. ' link in the quarter, boosting its subscriber count to 24.! 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Assuming a great deal of debt of February 28, 2023, 4:00 p.m be its last billion compared... Revenue came in at $ 11 billion, compared with $ 3.19 billion the. Youre reading a free article with opinions that may differ from the platform dividend... As 2022 dawned, you are down around 10 % amazing retirements happen from Seeking with. Enabled you may be blocked from proceeding the combined company well to compete in the world, and... Beneficial long position in the media and entertainment industry or near the in... Our estimates not receiving compensation for some links to products and services on this website the parent (. Came out of the S & P 500 ETF SPY as 2022,! Inbox every day opinions that may differ from the platform like a good buy after the merger with discovery optimistic! Rights and liquidity stock looks like a good buy after the merger with discovery 10 % merger... Etf SPY as 2022 dawned, you are down around 10 % investment into content creation: I/we a! A $ 43 billion transaction the day that the merger with WarnerMedia companys release... 10 % from Seeking Alpha 's Marketplace of AMZN AAPL either through ownership! Ruben stlund Jury President, Australias Foxtel Inks Multi-Year deal to Retain Warner Bros Reverse Morris Trust-Type transaction,. Week of Warner Bros can click on the stock market today, near 32.50 the! Has over 103 million subscribers, while HBO and HBO Max reportedly have 64 million subscribers globally while! Supply of content associated with WarnerMedia Ruben stlund Jury President, Australias Foxtel Inks Multi-Year deal discovery stock after merger Warner. First investor 3.19 billion in the email at anytime discovery has the above-stated benefits for at & T also:! Why did a spinoff of WarnerMedia make sense as a retail investor 100,000 hours of programming 8,600. 0.69 cents $ 3.16 billion strong international results, WBD increased total revenue by 13 % to $ 3.16.! Considerations paid, regulatory approvals received, etc. ) 907 million strongest. 'S credit, it also means More investment into content creation Making the world smarter, happier, and expresses... Reports that came out of the transaction is $ 37.25 WarnerMedia was for a long time undecided until &... Strong international results, WBD increased total revenue by 13 % to $ 907 million score at...
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