By Dhirendra Tripathi
Investing.com – Discovery (NASDAQ:DISCA) shares rose 9%% Monday after AT&T (NYSE:T) confirmed reports it will combine its media assets and merge them with the company behind TLC and Animal Planet.
AT&T shares rose 4.4% in early trading.
The new combined entity is projected to have approximately $52 billion in revenue by 2023 and adjusted earnings before interest, taxes, depreciation, and amortization of around $14 billion.
The deal gives Discovery content from WarnerMedia to compete against the likes of Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS) in the online streaming business. Discovery itself has a global footprint, deep local-language content and regional expertise. WarnerMedia includes CNN, HBO, and the Warner Brothers movie studio and makes up half of AT&T's $230 billion market value.
For AT&T, the deal will provide the much-needed cash to trim a $169 billion debt load that ballooned by $21 billion in March quarter alone. It will also help it focus on 5G, the next broadband frontier for telecom companies.
AT&T will receive $43 billion in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt. Its shareholders will get stock representing 71% of the new company; Discovery shareholders will own 29% of the combined entity.
Discovery’s unscripted cooking and home refurbishment shows account for a large part of its $18 billion market valuation.