AT&T to Spin off WarnerMedia in $43 Billion Discovery Media Merger

AT&T said on Tuesday it will spin off WarnerMedia in a $43 billion transaction to merge its media properties with Discovery and also cut its dividend by nearly half. shareholders will own 71% of the new Warner Bros. Discovery company and will receive 0.24 shares of Warner Bros.

AT&T will have 7.2 billion diluted shares outstanding after the transaction closes.shares were down about 4% Tuesday morning. will pay a dividend of $1.11 per share, down from $2.08 per share. This is at the lower end of an $8 billion to $9 billion range AT&T had forecast earlier.

The deal to unwind $85 billion purchase of Time Warner was announced early last year, but some financial details were not disclosed until Tuesday. AT&T repeated its expectation the spin will close in the second quarter of 2022.had contemplated a split-off, rather than a spin, of WarnerMedia. In that scenario, shareholders would have the option to exchange shares for stock in WarnerMedia-Discovery.

The transaction will also help reduce AT&T heavy debt load. It ended the fourth quarter with net debt of $156.2 billion, giving it a net debt to adjusted EBITDA ratio of about 3.22 times.said it expected the debt ratio to drop to 2.5 times by the end of 2023 and that it would consider share buybacks if the ratio is reduced further.Warner Bros Discovery will be playing catch up to larger streaming video rival Netflix even though WarnerMedia’s HBO Max grew faster in the United States in the fourth quarter, ending the year with 74 million subscribers. Netflix has more than 222 million global subscribers.