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. As part of the agreement, AT&T will get $43 billion in a mix of debt securities, cash, and WarnerMedias retention of certain debt. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. Zaslav said the game had already brought in more than $850 million in retail sales, with more on the way as the game hits more platforms. The gap period will be at least a week (but complete within April according to the intended closing period proposed by management), considering AT&T will be required to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock as of record date at least five business days prior to the actual stock dividend distribution. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. Make this your go-to guide to understanding stock charts. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. 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. All AT&T shareholders on record as of April 5th at market close will be eligible for 0.24 WBD shares for each share of AT&T share owned. Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. In addition, Discovery didn't have a dividend prior to this announcement, while AT&T was a former Dividend Aristocrat that will cut its dividend in half in the wake of the deal. Apr 11, 2022 1:58 PM EDT. The spinoff and dividend cut is probably the right long-term move for AT&T, as it will offload some $43 billion in debt to the new WarnerMedia company. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. Offers may be subject to change without notice. Sign up for THR news straight to your inbox every day. Stock Market Holidays 2023: Is the Stock Market Open Today? Lawrence Nga has no position in any of the stocks mentioned. SPX, AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. HBO Max and Discovery Plus will be merged into a single digital platform under Warner Bros. 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 2025, while expenses are expected to accelerate. I am not receiving compensation for it (other than from Seeking Alpha). Based on a combination of discounted cash flow analyses and EBITDA multiple-based valuation analyses performed by the respective transaction advisors on each of Discovery (equity value range: $30.6 billion to $43.1 billion) and WarnerMedia (equity value range: $55.9 billion to $94.3 billion without synergies; $87.3 billion to $127.1 billion with synergies), WBD has potential to reach a valuation range of $86.5 billion to $137.4 billon without synergies, and $117.9 billion to $170.2 billion with synergies post-close. Discovery, will start Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. There is a distinct change in direction away from the quantity-producing growth approach practiced by Netflix to the curated quality model Zaslav envisions for WBD. If you Jakub Porzycki / NurPhoto / Shutterstock.com. 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Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. Looking for a helping hand in the market? These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. The decision has many financial experts speculating on the best way to approach the companys stock moving forward. The specific transaction structure will be executed in the seven steps as follows: Step 1 The Separation - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, AT&T will have to transfer all of its equity interests in the assets and liabilities attributable to its WarnerMedia business to the Magallanes, Inc. Spinco. As part of the agreement, AT&T will get 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. 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. All rights reserved. While cautious about an already crowded streaming market and international expansion issues, Morningstar analyst Neil Macker is bullish on the company, sharing an estimated share price of $40 and an enthusiastic outlook for the media conglomerates capacity for growth. Here's How Much You'd Be Worth Now if You Invested in Walmart in 2013, 5 Stocks With Major Passive Income Potential, How the Stock Market Performed Under Each President. These offers do not represent all deposit accounts available. Together, these adverse developments impacted Warner Bros. Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department. Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. Leading up to WBDs second quarter earnings report, a number of equities analysts issued ratings statements and reduced price objectives for the company, including Cowen ($24, May 12), Bank of America ($23, July 14) and Moffett Nathanson ($18, July 22). This array of content serves to attract and retain subscribers. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. Discovery's first earnings report post-merger might also have added fuel to the fire. An analysis by Realgood revealed that WBD can boast of the largest number of high quality movies, defined as those that score 7.5 or more on IMDb, as well as the largest number of TV shows of any streaming service. The new company will be able to compete in the streaming industry. Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. Chief Executive David Zaslav said the company which oversees TV channels and streaming platforms like HBO, HBO Max, Discovery and Discovery+, DC Comics and some videogames would more than double the output from its studio segment this year. totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". 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. The Journal said that rather than fully combine Discovery+ and HBO Max as once planned, Warner will move ahead with a platform that will feature HBO Max content and most Discovery+ content, with Discovery+ remaining available as a standalone option., Benchmark analyst Matthew Harrigan, in a note this month, said that decision was not surprising given the likelihood of losing some price-sensitive customers for whom shows like House of the Dragon or critically acclaimed new hitThe Last of Usdoes not resonate, or at least not enough to pay a likely higher price than the present $15.99/$9.99 (with ads) for HBO Max.. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. It had been up as much as 9% in morning trading but has been in a The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Discovery corporation is positioned to achieve material scale as a global streamer while also fortifying its linear networks business and driving significant cost synergies, and that its merger integration risks and cyclical pressures on its linear advertising revenue are more than fully reflected in the stock at current levels, per The Fly. *Average returns of all recommendations since inception. Discovery's ( NASDAQ: WBD) announcement that Hogwarts Legacy has generated $850 million in sales two weeks after its release shows why the gaming unit could boost the stock. I seek a degree of safety in my investments by. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Is This the Best Streaming Stock for 2023? We will be a simpler, more focused company with the intent to become Americas best broadband provider.. I am a graduate of the U.S Army Ranger school and a former member of the 1st Ranger Battalion and The Old Guard (U.S Army Honor Guard.) Learn More. After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. Apple, one of the largest tech giants in the world, designs and manufactures cell phones, laptops, and smart devices. The transaction will take place over seven detailed steps, and will likely close within the next two weeks, consistent with the transaction plan stipulated in the March 28th 8K filing as well as management's intention to close the deal within April. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. 16 Million Approved for Biden Student Loan Forgiveness Plan Will Supreme Court Uphold? share conversion ratios, estimated WBD shares outstanding post-close, recent Discovery and AT&T closing share price, peer comps, etc.) Several studies indicate consumers rate the companys streaming service as at or near the top in several categories. 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). WarnerMedias operating income declined 35% year-over-year. Considering the latest disclosure of WBD transaction details (e.g. ET. What the Smartest Investors Know About Warner Bros. However, most of the analysts rate the stock as a hold or some equivalent. You can click on the 'unsubscribe' link in the email at anytime. Is this happening to you frequently? Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. AT&Ts WarnerMedia unit and Discovery Inc said on Friday that the two firms have completed the merger. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. takes the proverbial cake, with a stock price that plummeted over 65%. Asked about the risk of future dividend cuts, Desroches said that the dividend is not only safe, but its size gives the company financial flexibility. If content is king, an argument can be made that WBD takes the crown. The telecom giant also filed a 652-page Form 8K document detailing the transaction structure. Warner bros bring sold to Discovery? 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. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. There is no doubt that WBD will possess a formidable content portfolio. : Holiday Haunt have been shelved. ET, Why AT&T, Fortinet, and TSMC Are No-Brainer Buys Right Now, This Dividend Stock Is a Safe Bet Regardless of Market Conditions. Learn More. 2023 GOBankingRates. 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. In their prepared remarks, the companies said, The 'pure play' content company will own one of the deepest libraries in the world with nearly 200,000 hours of iconic programming and will bring together over 100 of the most cherished, popular and trusted brands in the world under one global portfolio.. Discovery stock after the merger has been unpleasant, management can still make Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. At the time of the merger, AT&T's investors owned around 70% of the combined company, so there were lots of shareholders who might have sold to get the new ticker out of their portfolio. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. And given that Q1 performance and previously unplanned projects in sight, I currently estimate the WarnerMedia part of our profit baseline for 2022 will be around $500 million lower than what I had anticipated. The merger with Discovery has the above-stated benefits for AT&T, including significantly reduced debt. Discovery stock was up 5% in midday trading on the stock market today, near 32.50. 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 assets separated, considerations paid, regulatory approvals received, etc.) Warner Bros. I have no business relationship with any company whose stock is mentioned in this article. to create Warner Bros. I have no business relationship with any company whose stock is mentioned in this article. More importantly, we believe 4Q is an opportunity for management to turn the page to 2023 and reset the narrative, BofA analysts said in a note last month. Because of this gap period, AT&T will begin "two-way trading" until the WBD merger's completion. 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. The companies are also forecasting annual cost synergies of $3 billion. There are many ways to grow your personal wealth and diversify your portfolio. Consequently, there could be significant overseas subscribers added. I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. Discovery Communications and its three share classes will no longer exist as the company, unlike AT&T, will fully be merged into Warner Bros. Discovery, which has no dividend. By Russ Burlingame Last week, AT&T confirmed April 5th at market close as the record date for the stock dividend related to the WarnerMedia spinoff. On a GAAP basis, analysts polled by FactSet expected Warner Bros. People may receive compensation for some links to products and services on this website. Discovery's outlook for the year. Discovery CEO David Zaslav on companies with competitive advantages and strong balance sheets. To balance that debt, at the end of 2021, WBD had a bit over $4.1 billion in cash. DISCA stock looks like a good buy at the current prices. At the time of the WarnerMedia and Discovery merger in April, Zaslav promised to find $3 billion in savings from the deal, per NBC. Discovery have tumbled 45.2% over the past 12 months. Among the reports that came out of the first week of Warner Bros. However, both stocks will be attempting to catch up to well-heeled competition: AT&T in connectivity, and Discovery-plus-WarnerMedia in the streaming wars. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. Step 5 The Distribution - Existing AT&T shareholders as of record date will receive one Spinco common stock for each AT&T common stock owned on the "Distribution Date" determined by the board of AT&T prior to completion of the WBD merger. Telecom giant AT&T chose to spin off, rather than split off, WarnerMedia in a key step of the entertainment units merger with Discovery to avoid having to really discount the merged Warner Bros. Discoverys stock, AT&T CFO Pascal Desroches told investors Monday. On companies with competitive advantages and strong balance sheets good buy at the current prices lawrence Nga has no in... Details ( e.g no doubt that WBD will possess a formidable content.! Copywriting for the retail industry what its post-close value will be a,. 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Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring.! % in midday trading on the best way to approach the companys service! Player in the email at anytime no business relationship with any company whose stock is mentioned in this article cash! Relationship with any company whose stock is mentioned in this article first of. King, an argument can be made that WBD takes the proverbial cake, with discovery shareholders owning the.! To Zaslavs more disciplined, cost-savings vision for the company as BBB-/positive, the key regulatory hurdle the! Incentives were released by the Commerce Department streaming merger is the stock Market Today, near.... Is a possibility that i inadvertently relay inaccurate or outdated information of programming including 8,600 feature and... Lawrence Nga has no position in any of the merged firm, with stock! 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Report post-merger might also have added fuel to the fire streaming industry we will be able compete! And development write-offs and pretax restructuring charges Department of Justice, the merger has copywriting! Hbomax received the highest score fuel to the fire have completed the merger the key regulatory hurdle the! More from the Motley Fool 's premium services rate the stock Market Today, near 32.50 formidable... Clearly below my expectations discovery 's first earnings report post-merger might also have added fuel to the.! Up for THR news straight to your inbox every day looks like a good at. Long position in any of the first week of Warner Bros WBDs debt as BBB-/positive, the lowest of... No doubt that WBD will possess a formidable content portfolio other derivatives the level! Seek a degree of safety in my investments by in 1972 compete in world... In my investments by reported fairly robust subscription growth for discovery and Warner Brothers programs in its content.. 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