AT&T has announced it will spin off 100% of its interest in WarnerMedia to AT&T’s existing shareholders in a pro rata distribution.
The transaction, followed by the merger of WarnerMedia with Discovery, is expected to close in the second quarter of this year.
In addition, AT&T approved an expected post-close annual dividend of $1.11 per AT&T share.
Under the terms of the transaction, AT&T will receive $43 billion (subject to working capital and other adjustments) in a combination of cash and other consideration, and AT&T’s shareholders will receive stock representing approximately 71% of the new company, Warner Bros. Discovery, Inc. (WBD), on a fully diluted basis. Existing Discovery shareholders will own approximately 29% of the new company on a fully diluted basis.
Commenting on the development, AT&T CEO John Stankey said: “In evaluating the form of distribution, we were guided by one objective — executing the transaction in the most seamless manner possible to support long-term value generation.
“We are confident the spin-off achieves that objective because it’s simple, efficient and results in AT&T shareholders owning shares of both companies, each of which will have the ability to drive better returns in a manner consistent with their respective market opportunities.
“We believe that the remaining AT&T and the new WBD are two equities that the market will want to own and the markets to support those equities will develop.
“Rather than try to account for market volatility in the near-term and decide where to apportion value in the process of doing an exchange of shares, the spin-off distribution will let the market do what markets do best. We are confident both equities will soon be valued on the solid fundamentals and attractive prospects they represent”.
