DISCB Discovery Inc

By Drew FitzGerald 

AT&T Inc. and Discovery Inc. reached a deal to combine their media assets into a new publicly traded company, unwinding the telecom company's big bet on entertainment after less than three years.

The new business, which isn't yet named, will be led by current Discovery Chief David Zaslav. The companies said AT&T's Jason Kilar will retain his title as WarnerMedia CEO. AT&T shareholders will hold a 71% stake in

In exchange, AT&T said it would receive $43 billion of cash, debt securities and WarnerMedia's retention of certain debt.

AT&T also said it would adjust its dividend policy to reflect the structure of the new media business. The company said it expects an annual dividend payout ratio of 40% to 43% from more than $20 billion of expected free cash flow.

The Dallas company spent about $15 billion last year on the shareholder payouts, which many individual investors have long valued as a stable source of income.

AT&T reported $169 billion of net debt at the end of March, a level that has troubled some investors worried about the conglomerate's financial flexibility.

WarnerMedia owns cable channels such as HBO, CNN, TNT and TBS as well as the Warner Bros. television and film studio. Discovery has a portfolio that includes its namesake network and HGTV.

The tie-up is a surprising U-turn by AT&T, which placed a massive bet on media with its 2018 acquisition of Time Warner Inc. for around $81 billion. That deal made it the world's most indebted nonfinancial company.

The companies said they expect to close the transaction in mid-2022.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

May 17, 2021 08:02 ET (12:02 GMT)

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