Were it not for the effects of foreign exchange, International would have recorded a 30% increase. Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. ), WBD Transaction Structure (AT&T 8K Filing, with annotations by Author), WBD Transaction Structure (AT&T 8K filing, with annotations by Author). Due diligence should be exercised and readers should engage in additional research and analysis before making their own investment decision. The service will allow you to follow my model portfolio, interact with me directly, and participate in chat rooms with other subscribers. WBD, AT&T last week outlined its vision to be a leading broadband provider in the U.S. following the WarnerMedia transaction. If you have an ad-blocker enabled you may be blocked from proceeding. And it will be available in 220 countries and 50 languages. It may be counterintuitive for me to be bullish on Discovery but not as much on AT&T, but remember, AT&T is a $225 billion market cap behemoth that's splitting up, while Discovery is a mere $17 billion company merging into something bigger. Readers should consider this when weighing my buy/hold/sell recommendations. 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. Discoverys stock was down 2.9 percent at $27.10 at that time. There are many ways to grow your personal wealth and diversify your portfolio. Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department. The combination of issued Spinco Debt Securities and cash proceeds from Spinco Financing Agreements provided to AT&T as part of transaction step #2 must total $43 billion, which represents the total consideration paid by Spinco to AT&T in exchange for its equity interests in the assets and liabilities of WarnerMedia (i.e. With a loss of 6% in 2022, Paramount Global (PARA) stands out as the winner, so to speak, among this bunch. It's worth noting that these forecasts were before Discoverys merger announcement. Disclosure: I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. 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). This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). Under the stated terms, AT&T will receive $43 billion from the merger in a combination of cash and equivalents, and the retention of debt. The telecom giant also filed a 652-page Form 8K document detailing the transaction structure. 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. -2.01% 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. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing 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. Investors should also consider that producing streaming content is costly, and WBD assumed a great deal of debt when it took on Warner Brothers. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. I'll be launching in the near future with a legacy discount for early subscribers and I'll be sharing more details as we ramp up to launch in the coming months. Based on 14 ratings, nine analysts had WBD stock as a moderate buy, five rated it as a hold, and only one appraiser had the company as a sell. With over 40 individual picks yielding +7%, you can supercharge your retirement portfolio right away. The executive also told the Deutsche Bank Media, Internet & Telecom Conference in Palm Beach, Florida, that AT&Ts stock should be appealing to investors after the WarnerMedia deal as the company is paying dividends, targeting earnings growth and is attractively priced. 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. Disclosure: I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. $33 billion fair value attributable to WarnerMedia assets + $10 billion additional amount) funded by a combination of debt securities and cash from Spinco provided to AT&T. 2023 The Hollywood Reporter, LLC. Warner Bros. 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. 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. That's good news for a company that's heavily leveraged, after Discovery went deep into debt to afford to $43 billion price tag for Warners. 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. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. 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.". Zaslav hasnt been shy in making changes that align with the Warner Bros. Discovery transition into a direct-to-consumer powerhouse by focusing further investment in content and the user experience, which has garnered complaints on both HBO Max and Discovery+.. 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. takes the proverbial cake, with a stock price that plummeted over 65%. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run. What the Smartest Investors Know About Warner Bros. 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. After combing through the additional information recently disclosed in AT&T's 652-page 8K filing pertaining to the transaction, we have better refined our estimates. All Rights Reserved. Erik Khalitov/iStock Unreleased via Getty Images. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. These offers do not represent all available deposit, investment, loan or credit products. This increased its subscriber numbers to 76.8 million. Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: 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. I am not receiving compensation for it (other than from Seeking Alpha). Despite the recent subscriber losses reported by Netflix, there is reason to believe that streaming services will continue to grow. 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 16 Million Approved for Biden Student Loan Forgiveness Plan Will Supreme Court Uphold? On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. 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 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 Discovery, will start And Discovery's largest shareholder, John Malone, supported the deal wholeheartedly. Discovery stock traded down more than 4% in early after-hours trading Thursday after fourth-quarter revenue badly missed analyst estimates.. Fourth-quarter revenue came in at $11.1 billion Author's Note: Thank you for reading my analysis. The firm maintained its market perform rating on Warner Bros. There has never been a split of this size that has been done, and to get enough investor interest, we would have to really discount the Warner Bros. Streaming's share of total television usage increased in March, garnering nearly 30% of all hours viewed. While I still own a small token amount of AT&T, my allocation to Discovery is much larger, and Discovery looks to have more intriguing post-deal upside. The stock could be a long-term winner based on its the strong growth potential in the streaming industry. Lawrence Nga has no position in any of the stocks mentioned. 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. 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. Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. Latest Technology & Communications News and Updates. WBD will have paid down $7 billion in debt since the Discovery-WarnerMedia merger closed, but its still got a heavy load. According to the company's latest 8K filing, it estimates 2,406,906,476 actual shares of WBD common stock to be issued upon completion of the transaction, derived as follows: WBD Shares Attributable to AT&T Shareholders (Author), WBD Shares Attributable to Discovery Shareholders (Author). 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. I have no business relationship with any company whose stock is mentioned in this article. There was an unknown error. Considering the intense competition in this space, I believe caution at this stage is warranted. I wrote this article myself, and it expresses my own opinions. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. I am not receiving compensation for it (other than from Seeking Alpha). Since the merger was structured so that AT&T would spin off its holding of WarnerMedia and then merge the company with Discovery, AT&T investors got shares of the new company without doing anything. 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.. The same group is repeating its act again, albeit on a bigger deal. AT&T is also still behind competitors in 5G deployment, and is up against stiff competition in the fiber broadband space. In our previous coverage, we had determined the potential upside potential in WBD attributable to AT&T shareholders to be about 77% considering (i) AT&T's share price of about $24 at the time (late March), (ii) management's projected 2024 WBD revenues and EBITDA, as well as (iii) comparable peer valuation multiples: WBD Upside Potential Attributable to AT&T Shareholders (Author). Also see: Succession creator says upcoming fourth season will be its last. Price as of February 28, 2023, 4:00 p.m. Discovery planned to keep Discovery+ as a standalone streaming platform, as the company weighs how to make more of its content available in a single place. Discovery, which has no dividend. If so, how? If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. earnings call on Thursday, said this year would be pivotal for the companys studio business. The company posted a 5% growth in U.S. advertising and an 11% increase in distribution revenue due to Discovery+. May 17, 2021 2:01 PM EDT. Billy Duberstein owns shares of AT&T, Discovery (C shares), and Netflix. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. I am a also value / buy and hold investor. The new entity will focus on streaming services. with the stock up over 60% year to date, reversing losses from 2022 When the new leadership team led by David Zaslav took charge of Warner Bros. I own a house with my husband and mother. The distributed Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. If you have an ad-blocker enabled you may be blocked from proceeding. Last week, AT&T confirmed April 5th at market close as the record date for the stock dividend related to the WarnerMedia spinoff. SPX, Now that the close of the WarnerMedia deal is approaching, we are near the starting line of a new era for AT&T, said Stankey on Friday. Visit a quote page and your recently viewed tickers will be displayed here. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. Sign up for our daily newsletter for the latest financial news and trending topics. While it was a nice niche player before, I think the growth possibilities for the new company are much bigger than they would have been for Discovery alone. The Motley Fool has a disclosure policy. However, I admit I have reservations regarding the companys debt load and financial prowess. 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. 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. The resultant company, Warner Bros. Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. DISCA stock looks like a good buy at the current prices. Apr 11, 2022 1:58 PM EDT. Desroches mentioned that Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. Is This the Best Streaming Stock for 2023? Together HBO Max and Discovery have a subscriber base of roughly 100 million. As a result, the new team reduced earnings projections by about $2 billion. In other words, if an AT&T shareholder decides to sell an AT&T share under Ex-Distribution Trading between April 4th and the WBD transaction completion date, they will only be retaining rights to the WBD shares distributed to them as a result of their AT&T share ownership as of the record date (April 5th market close). AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. Discovery is now a buy, hold or sell. 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. Read More About: AT&T Copyright 2023 MarketWatch, Inc. All rights reserved. Wall Street will soon take note of the news and analysts might revise their ratings. 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. ) (I update this score on at least a quarterly basis for readers.). Trading AT&T and Discovery After $43 Billion Media Merger AT&T and Discovery have come to terms on a $43 billion media deal. Its options had been the spinoff, in which AT&T stockholders will receive shares in the merged company in addition to their existing AT&T shares; a split-off, which would have allowed shareholders to choose between stock of AT&T and the new company; or some combination of the two. AT&T stockholders will end up owning 71 percent of the new Warner Bros. Another massive streaming giant round the corner? Discovery (WBD -2.01%). Discovery have tumbled 45.2% over the past 12 months. The forward P/E for the company is 8.68x, and the 5-year PEG is 0.43x. 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 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. - April 18, 2022 08:39 am EDT. Invest better with The Motley Fool. In addition to announcing April 5th as the record date for AT&T shareholders eligible for the special stock dividend pertaining to the WarnerMedia spinoff, the telecom giant also submitted a 652-page filing 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 Discovery (Nasdaq: DISCK, DISCA, DISCB) to create Warner Bros. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). The companies are forecasting a free cash flow conversion ratio of 60 percent, which looks very healthy. On a GAAP basis, analysts polled by FactSet expected Warner Bros. Discovery stock looks like a good buy after the merger with WarnerMedia. Discovery a Buy? The company finished the quarter with 96.1 million subscribers. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. Is this happening to you frequently? WBD Transaction Structure (AT&T 8K filing, with annotations by Author. 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. I have no business relationship with any company whose stock is mentioned in this article. See which stock you should consider. Cost basis and return based on previous market day close. 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. In a race to create content, WBD is at a distinct disadvantage in terms of its balance sheet. The companies are also forecasting annual cost synergies of $3 billion. The consensus 12-month price target of the five analysts rating the stock is $37.25. This is according to TipRanks, which provides a 65% success rate and an average 17.6% annual return for my articles. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. Score on at least a quarterly basis for readers. ) discovery stock after merger its the strong potential. Own a house with my husband and mother closed, but its still got a heavy load and Climbing this... 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