AT&T-Warner Deal Puts Some Discovery Insiders Ahead From the Start
May 19 2021 - 2:44PM
Dow Jones News
By Theo Francis
Some of Discovery Inc.'s biggest shareholders are getting a
premium price for their stakes in the media company under the deal
that combines it with AT&T Inc.'s media business, securities
filings show.
Advance Publications Inc. and Newhouse Broadcasting Corp., which
already control around a quarter of two classes of Discovery's
shares, are set to receive what amounts to a 14% premium over their
ownership stake in exchange for agreeing to vote for the deal and
convert their preferred shares to common shares.
The companies have yet to file formal registration statements
detailing the transaction. But available details show the degree to
which insiders are poised to benefit from a deal that shook the
media and telecommunications landscapes on Monday, when AT&T
said it would spin off HBO, CNN and the rest of its WarnerMedia
division and combine it with Discovery.
Some of the preferred shares held by Advance and Newhouse give
the investors "consent rights" over major decisions, including
issuing new stock, mergers and other business combinations,
Discovery's most recent annual report notes.
Under the deal proposed by AT&T and Discovery, the resulting
company will emerge with a single share class, eliminating the
special privileges that the Advance/Newhouse investors have,
securities filings say.
In return for Advance's and Newhouse's consent for the
transaction, Discovery has agreed to increase the number of common
shares that the investors will receive by converting preferred
shares, yielding the 14% premium, the securities filings say. The
companies' stake in Discovery was valued at about $5.4 billion as
of Monday's close, according to a calculation by InsiderScore,
which analyzes stock transactions by corporate insiders.
Discovery also agreed to name to the board of the combined
company Advance/Newhouse Partnership Chief Executive Steve Miron,
who is also a senior executive at Advance, and Steven Newhouse,
Advance's co-president, the filings show. Advance Publications is
controlled by the Newhouse family and owns the Condé Nast magazine
empire and metropolitan newspapers, among other media
properties.
As part of the arrangement, Advance and Newhouse have agreed to
vote in favor of the transaction even if Discovery's board changes
its mind and recommends that shareholders oppose it, AT&T says
in a securities filing.
John Malone -- a media magnate who sits on Discovery's board and
controls about a quarter of the voting power of Discovery's shares
-- has made a similar pledge, but said in a statement that he
supported the deal without seeking a premium. Together, Mr. Malone,
Advance and Newhouse control about 44% of Discovery's voting
shares, AT&T notes in a filing.
In a statement, Advance called the transaction good for all
shareholders and said that the company is forfeiting significant
rights by voting to abandon the old share-class structure and that
an independent committee of Discovery's board concluded its premium
was fair.
AT&T and Discovery have said they expect the deal to close
in mid-2022.
Write to Theo Francis at theo.francis@wsj.com
(END) Dow Jones Newswires
May 19, 2021 14:29 ET (18:29 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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