AT&T to spin off interest in WarnerMedia as part of $43 billion Discovery merger

AT&T has announced plans to spin off its interest in WarnerMedia as part of the company's merger with Discovery.

AT&T said Tuesday its board of directors has decided it will "spin off 100 percent of AT&T's interest in WarnerMedia to AT&T's existing shareholders in a pro rata distribution" as WarnerMedia merges with Discovery, as previously announced. AT&T shareholders will receive 0.24 shares of Warner Bros. Discovery common stock for each AT&T share owned, the announcement said.

AT&T CEO John Stankey described this move as the best option because it's "simple, efficient and results in AT&T shareholders owning shares of both companies." It was previously unclear whether AT&T would spin off WarnerMedia or instead do a split off, in which shareholders "​​would have the option to exchange AT&T shares for stock in WarnerMedia-Discovery," Variety explains.

The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

"I think they looked at this and they wanted to make sure that it was done this way because they thought it would give the retail investor their own decision on what they would do with this," CNBC's Becky Quick said. "If you want to keep your stock in both companies, you can do that. If you want to sell Warner Bros. Discovery and put it back into AT&T to get yielders or do something else with it, they just thought that it gave more flexibility."

AT&T previously announced it would merge WarnerMedia, the parent company of brands like HBO and CNN, with Discovery in a $43 billion deal. This came just three years after AT&T acquired Time Warner. The company is set to be led by David Zaslav, the current CEO of Discovery.

AT&T said Tuesday this transaction is expected to close in the second quarter of 2022.