TIDMBT.A
RNS Number : 2401L
BT Group PLC
12 May 2022
BT Group plc
12 May 2022
BT GROUP AND WARNER BROS. DISCOVERY AGREE JOINT VENTURE
Following its announcement of exclusive discussions on 3
February 2022, BT Group plc ("BT Group") has agreed a set of
definitive agreements with Warner Bros. Discovery, Inc. ("Warner
Bros. Discovery") to form a 50:50 joint venture company to create a
new premium sport offering for the UK & Ireland (the "JV"), and
to transfer the operating businesses of BT Sport to Warner Bros.
Discovery (together the "Transaction").
By bringing together the sports content offering of both BT
Sport and Eurosport UK, the JV will have one of the most extensive
portfolios of premium sports rights including UEFA Champions
League, UEFA Europa League, the Premier League, Premiership Rugby,
UFC, the Olympic Games, tennis Grand Slams featuring the Australian
Open and Roland-Garros, cycling Grand Tours including the Tour de
France and Giro d'Italia and the winter sports World Cup
season.
Those customers who access BT Sport through BT directly, and the
majority of BT TV customers, are set to receive discovery+, the
non-fiction entertainment streaming service which is home to
Eurosport's live and on-demand streaming offer in the UK &
Ireland, as part of existing subscriptions.
Both BT Sport and Eurosport UK will initially retain their
separate brands and product propositions in the market before being
brought together under a single brand in the future. BT Group
(through its wholly owned subsidiary British Telecommunications plc
("BT plc")) and Warner Bros. Discovery will enter into distribution
agreements with the JV under which they will distribute the
combined sports content to new and existing customers on their
respective platforms and apps.
Key highlights
-- BT Sport and Eurosport UK to be brought together to form a
premium sports joint venture for customers in the UK & Ireland
which will be owned 50:50 by BT plc and Warner Bros. Discovery.
-- Warner Bros. Discovery and BT plc will each directly
contribute, sub-license or deliver the benefit of their respective
sports rights and distribution agreements for the UK & Ireland
to the JV.
-- The Transaction will deliver operational efficiencies through
the transfer of the operating businesses of BT Sport to Warner
Bros. Discovery.
-- BT plc will receive GBP93m from Warner Bros. Discovery and up
to approximately GBP540m by way of an earn-out from the JV, subject
to certain conditions being met.
-- BT plc will retain a 50% interest in the JV, and Warner Bros.
Discovery will be granted a Call Option over BT plc's interest in
the JV, exercisable at specified points in the first four years of
the JV.
-- The Transaction is subject to customary closing conditions,
including approvals by the relevant regulatory bodies and is
expected to complete by the end of 2022.
Marc Allera, CEO BT's Consumer division, said "As a global
sports and entertainment broadcaster Warner Bros. Discovery is the
perfect partner to work with us to take BT Sport to the next stage
of its growth. We're excited to be joining forces to bring the best
of BT Sport together with Eurosport UK to create a fantastic new
sports offer alongside all the entertainment that discovery+ has to
offer BT customers."
"I'm incredibly proud of the established, creative and
innovative broadcaster that BT Sport has become. We have a
brilliant team who are dedicated to broadcasting amazing sporting
moments and we look forward to working with Eurosport UK to realise
the opportunities that this next stage will bring both our team and
our viewers."
Andrew Georgiou, President and Managing Director, Warner Bros.
Discovery Sports Europe said "We are excited to bring fans a new
premium sport offering that brings together everything they love
from BT Sport and Eurosport UK. Combining this with our growing
portfolio of premium entertainment content promises to deliver
consumers a richer and deeper content proposition, not only
providing greater value from their subscriptions but bringing sport
to a wider entertainment audience."
The Transaction constitutes a class 2 transaction for the
purposes of the UK Financial Conduct Authority Listing Rules and,
as such, BT Group plc shareholder approval is not required.
Lazard is acting as exclusive financial adviser to BT Group and
CMS Cameron McKenna is acting as legal adviser to BT Group. DLA
Piper is acting as legal adviser to Warner Bros. Discovery.
Additional information
Transaction Structure
The JV will be structured as a 50:50 joint venture, with each of
BT plc and Warner Bros. Discovery holding equal voting rights in
the JV.
At completion of the Transaction, the production and operational
assets of BT Sport will transfer to and become a wholly owned
subsidiary of Warner Bros. Discovery.
Governance
The Board of Directors of the JV will be equally represented
between appointees of BT plc and Warner Bros. Discovery.
The Chairperson of the Board will be a Board Director nominated
by each shareholder on a rotating basis, the first of which will be
Marc Allera.
Consideration
-- BT plc will receive GBP93m from Warner Bros. Discovery
(payable in instalments over the three years following transaction
completion) and up to approximately GBP540m by way of an earn-out
from the JV during the earn-out period, subject to certain
conditions being met.
-- BT plc will retain a 50% interest in the JV, and Warner Bros.
Discovery will be granted a Call Option over BT plc's interest in
the JV at a price to be determined at the time the option is
exercised.
The earn-out period will end at the earliest of i) four years
post completion of the Transaction, ii) the exercise by Warner
Bros. Discovery of the Call Option, and iii) if the earn-out
reaches the agreed cap .
Other distributions to shareholders
Any dividends (made after payments required under the earn-out)
shall be paid in equal proportions, to BT plc and Warner Bros.
Discovery.
Call Option
As part of the Transaction, Warner Bros. Discovery will have the
right, but not the obligation, to exercise a call option to acquire
the entire shareholding of BT plc in the JV (the "Call Option").
The Call Option will be exercisable at specified points during the
first four years of the JV and is subject to certain conditions and
arrangements. The price payable for 50% of the JV under the Call
Option will be at a price to be determined at the time the option
is exercised, plus any remaining consideration and earn-out that BT
plc will be entitled to at that time (subject to certain
conditions).
If the Call Option is not exercised by Warner Bros. Discovery
(as detailed above), BT plc will have the ability to exit its stake
in the JV either through a sale or IPO.
Proceeds cap
The consideration payable under the Transaction (including the
Call Option) is subject to a cap which is below the threshold for a
class 1 transaction (as defined by the UK Financial Conduct
Authority's Listing Rules) as at the time of this announcement.
Ancillary Agreements
The production and the operational assets of BT Sport to be
transferred to Warner Bros. Discovery who, upon completion, will
manage the day-to-day operations of the JV.
In addition, certain ancillary agreements and undertakings will
be entered into between BT plc and Warner Bros. Discovery, and
between BT plc, Warner Bros. Discovery and the JV; including those
necessary to ensure continuity of service to customers, and
relevant transitional arrangements.
As part of the Transaction, BT plc and Warner Bros. Discovery
will each enter into distribution agreements with the JV to become
the official UK distributor of the JV's sports channels across both
sets of platforms. BT plc's agreement with the JV will extend
beyond 2030, and for the first four years, includes a minimum
revenue guarantee of approximately GBP500m per annum, after which
the agreement will change to a fully variable arrangement.
The JV will also enter into a new agreement with Sky extending
beyond 2030 to provide for its distribution of the JV's combined
sports content. BT plc will also enter into a distribution
agreement with Warner Bros. Discovery to provide discovery+ to its
direct BT TV and BT Sport customers.
Accounting treatment
Upon completion of the transaction, BT plc's interest in the JV
is expected to be classified as a Joint Venture under IFRS 11, and
equity accounted for under IAS 28.
Information on BT Sport business
Based on unaudited management information, as at 31 March 2022,
the value of the gross assets of BT Sport business to be
contributed to the JV and the operating businesses of BT Sport was
GBP339m and it had an operating loss for the year of GBP222m.
Information on Eurosport UK business
Based on unaudited management information, as at 31 March 2022,
the value of the gross assets of Eurosport UK's rights and
distribution agreements contributed directly to the JV was GBP12m
and it had an operating profit for the year of GBP16m.
About BT
BT Group is the UK's leading provider of fixed and mobile
telecommunications and related secure digital products, solutions
and services. We also provide managed telecommunications, security
and network and IT infrastructure services to customers across 180
countries. BT Group consists of four customer-facing units:
Consumer serves individuals and families in the UK; Enterprise and
Global are our UK and international business-focused units
respectively; Openreach is an independently governed, wholly owned
subsidiary, which wholesales fixed access infrastructure services
to its customers - over 650 communication providers across the
UK.
British Telecommunications plc is a wholly-owned subsidiary of
BT Group plc and encompasses virtually all businesses and assets of
the BT Group. BT Group plc is listed on the London Stock
Exchange.
For more information, visit www.bt.com/about .
About Warner Bros. Discovery
Warner Bros. Discovery (NASDAQ: WBD) is a leading global media
and entertainment company that creates and distributes the world's
most differentiated and complete portfolio of content and brands
across television, film and streaming. Available in more than 220
countries and territories and 50 languages, Warner Bros. Discovery
inspires, informs and entertains audiences worldwide through its
iconic brands and products including: Discovery Channel,
discovery+, CNN, DC, Eurosport, HBO, HBO Max, HGTV, Food Network,
Investigation Discovery, TLC, TNT, TBS, truTV, Travel Channel,
MotorTrend, Animal Planet, Science Channel, Warner Bros. Pictures,
New Line Cinema, Cartoon Network, Adult Swim, Turner Classic Movies
and others.
For more information, please visit www.wbd.com
Disclaimer
Lazard & Co., Limited ("Lazard"), which is authorised and
regulated in the United Kingdom by the FCA, is acting exclusively
as financial adviser to BT plc and no one else in connection with
the matters set out in this announcement and will not be
responsible to anyone other than BT plc for providing the
protections afforded to clients of Lazard nor for providing advice
in relation to the matters set out in this announcement. Neither
Lazard nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Lazard in connection with this
announcement, any statement contained herein or otherwise.
Cautionary Statement Concerning Forward-Looking Statements
Certain information included in this announcement is forward
looking and involves risks, assumptions and uncertainties that
could cause actual results to differ materially from those
expressed or implied by forward looking statements. Forward looking
statements cover all matters which are not historical facts and
include, without limitation, projections relating to results of
operations and financial conditions and BT Group's plans and
objectives for future operations. Forward looking statements can be
identified by the use of forward looking terminology, including
terms such as 'believes', 'estimates', 'anticipates', 'expects',
'forecasts', 'intends', 'plans', 'projects', 'goal', 'target',
'aim', 'may', 'will', 'would', 'could' or 'should' or, in each
case, their negative or other variations or comparable terminology.
Forward looking statements in this announcement are not guarantees
of future performance. All forward looking statements in this
announcement are based upon information known to BT Group on the
date of this announcement. Accordingly, no assurance can be given
that any particular expectation will be met and readers are
cautioned not to place undue reliance on forward looking
statements, which speak only at their respective dates.
Additionally, forward looking statements regarding past trends or
activities should not be taken as a representation that such trends
or activities will continue in the future. Other than in accordance
with its legal or regulatory obligations (including under the UK
Listing Rules and the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority), BT Group undertakes no obligation
to publicly update or revise any forward looking statement, whether
as a result of new information, future events or otherwise. Nothing
in this announcement shall exclude any liability under applicable
laws that cannot be excluded in accordance with such laws.
Information set forth in this communication contains certain
forward-looking statements within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are based on current expectations,
forecasts, and assumptions that involve risks and uncertainties and
on information available to Warner Bros. Discovery as of the date
hereof. Warner Bros. Discovery's actual results could differ
materially from those stated or implied due to risks and
uncertainties associated with its business, which include the risk
factors disclosed in Warner Bros. Discovery's 2021 Annual Report on
Form 10-K filed with the U.S. Securities and Exchange Commission
(the "SEC") on February 24, 2022 and its subsequent filings made
with the SEC. Forward-looking statements include statements
regarding Warner Bros. Discovery's expectations, beliefs,
intentions or strategies regarding the future, and can be
identified by forward-looking words such as "anticipate,"
"believe," "could," "continue," "estimate," "expect," "intend,"
"may," "should," "will" and "would" or similar words.
Forward-looking statements include, without limitation, statements
regarding future financial and operating results, Warner Bros.
Discovery's plans, objectives, expectations and intentions, and
other statements that are not historical facts. Warner Bros.
Discovery expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in Warner Bros.
Discovery's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
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