By Dave Sebastian

 

Shares of Discovery Inc. and AT&T Inc. shot up Monday after the companies reached a deal to combine their media assets into a new publicly traded company.

Discovery shares rose about 16% to $41.40 in premarket trading, while AT&T shares rose 4.7% to $33.77.

AT&T would receive $43 billion in cash, debt securities and WarnerMedia's retention of certain debt under the all-stock deal, the companies said. AT&T shareholders would get stock representing 71% of the new entity, while Discovery shareholders would own the rest, the companies said.

The deal would further consolidate a media business buffeted by cord-cutting and competition from streaming video. 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.

Discovery President and Chief Executive David Zaslav would lead the proposed new entity, the companies said. The new company's board would have 13 members, seven initially appointed by AT&T, including the chairman of the board, the companies said. Discovery said it would initially appoint six members, including Mr. Zaslav.

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

 

Write to Dave Sebastian at dave.sebastian@wsj.com

 

(END) Dow Jones Newswires

May 17, 2021 08:19 ET (12:19 GMT)

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