What the Smartest Investors Know About Warner Bros. Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. People may receive compensation for some links to products and services on this website. A merger rarely goes without hiccups, so while the dip in Warner Bros. 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.. I'll be launching in the near future with a legacy discount for early subscribers and I'll be sharing more details as we ramp up to launch in the coming months. Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. Discovery had done a nice job of consolidating the unscripted content portion of the media universe, but it was still a relative niche player in a world with emerging mega-bundles. The companies are also forecasting annual cost synergies of $3 billion. We will not launch any new markets for the time being. We currently are holding a limited-time sale with 10% off your first year! Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. All relevant risks are not covered in this article. Upon completion of the merger, each Spinco common stock issued under transaction step #4 and distributed to existing AT&T shareholders as of record date under transaction step #5 will automatically convert into 0.24 shares of WBD common stock. And right or wrong, management has made a decision to invest a lot of the incoming funds into a number of investment initiatives. Discovery had reported 20 million subs as of Sept. 30 of 2021. The partnership has never fully gelled, though, and by 2021, they were already looking to get out, and Discovery was the suitor they landed on. This might explain the initial fall in Warner Bros. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. Management also emphasized that the company will take a circumspect approach to content spend. Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. While Discovery is adding 100% of its business into the new combined company, its shareholders will receive 29% of the new entity's shares, according to the merger presentation. to the transaction, we have better refined our estimates. Bret Kenwell. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. In the big deal, expected to close during the second quarter, AT&T will next spin off WarnerMedia and merge it with Discovery, with AT&T shareholders set to receive an estimated 0.24 share in the new company for each AT&T share held. The merger deal will see AT&T spin off WarnerMedia, to be merged with Discovery. It's worth noting that these forecasts were before Discoverys merger announcement. The company finished the quarter with 96.1 million subscribers. Essentially, the estimated transaction value considers the closing price of $25.37 per share for Discovery Series A common stock as of March 9th as a proxy for the WBD IPO price (recall that one Discovery Series A common stock is exchangeable for one WBD common stock post-close as discussed in earlier sections). Sign up for THR news straight to your inbox every day. -0.30% Magallane, Inc. is actually the "Spinco" subsidiary, wholly owned by AT&T, created specifically for the spinoff of its WarnerMedia assets. The consensus 12-month price target of the five analysts rating the stock is $37.25. I wrote this article myself, and it expresses my own opinions. Let the power of quality research drive your investment convictions. I seek a degree of safety in my investments by concentratingon companies with competitive advantages and strong balance sheets. Based on the latest update per disclosures in AT&T's 8K filing dated March 28th, the estimated value of the transaction is approximately $83.4 billion. To make the world smarter, happier, and richer. Our analysis provides a deep dive on growth drivers present in the secular market to identify outperforming investments. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). Among the reports that came out of the first week of Warner Bros. However, Warner Bros. In a filing in December, Warner Bros. Now, the record date is not the same as the transaction completion date. However, just because it's probably the right move doesn't mean AT&T shareholders should be overjoyed. All Rights Reserved. Now consider that the portfolio of Discovery+ will be added to that of HBOMax, and you have the makings of a content king. The potential synergies and economies of scale looked to position the combined company well to compete in the media and entertainment industry. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. WarnerMedias operating income declined 35% year-over-year. The Motley Fool recommends Warner Bros. Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate. To make the world smarter, happier, and richer. Stock Market Sell-Off: Is Warner Bros. Just a few years ago, the same team acquired and integrated Scripps Networks into Discovery. My primary focus is on dividend bearing stocks. Cost basis and return based on previous market day close. Erik Khalitov/iStock Unreleased via Getty Images. The European Commission, the executive body of the European Union, had approved the deal in December. As discussed in detail in our last coverage, AT&T will spinoff 100% of its current interest in WarnerMedia post-close. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. Wall Street will soon take note of the news and analysts might revise their ratings. Discovery. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. Author's Note: Thank you for reading my analysis. AT&T and Discovery on Monday announced that they will merge their media assets in a megadeal that creates a stronger rival to Walt Disney and Netflix amid global The approximate 1,709 million shares of WBD common stock attributable to AT&T shareholders post-close is also validated based on the 0.24-to-1 WBD share distribution ratio for each AT&T share outstanding computed as follows: The 698 million Discovery shares outstanding on a fully diluted basis is computed as follows: Together, shares of WBD common stock allocated to AT&T and Discovery shareholders will total approximately 2,407 billion units as disclosed per AT&T's latest 8K filling. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. Discovery shareholders would own 29 percent of the new entity, while AT&T shareholders would hold a 71 percent stake in the new company. Make this your go-to guide to understanding stock charts. 111). we also think that one of the big opportunities here is going to be churn reduction. are met. Looking for a helping hand in the market? to create Warner Bros. That sale is being blamed for the slow pace of renewals for some of The CW's shows, including the Warner Bros.-ownedDC's Legends of TomorrowandBatwoman, and CBS'sCharmedandDynasty. In the last quarter before the merger, AT&T reported 2.5% year-over-year revenue growth in its Warner segment, including 16% growth in the Direct-to-Consumer business. I wrote this article myself, and it expresses my own opinions. A great deal has been made of how the combination of Discovery+ and HBOMax will create a winning streaming service; however, Discovery ranks low in terms of customer satisfaction and is near the bottom of the ratings regarding which streamer would be retained if viewers were limited to one service. The estimated transaction value takes into consideration the closing price of $25.37 per share for Discovery Series A common stock as of March 9th, multiplied by There is no doubt that WBD will possess a formidable content portfolio. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. With the WarnerMedia spinoff fast approaching, AT&T (NYSE:T) has uploaded a series of press releases last week detailing how the transaction will take place. AT&T stockholders will end up owning 71 percent of the new Warner Bros. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. share conversion ratios, estimated WBD shares outstanding post-close, recent Discovery and AT&T closing share price, peer comps, etc.) Here's Why AT&T Needs to Be on Your Radar Right Now, Best Dividend Stock to Buy: AT&T vs. Ford vs. Intel, 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, Copyright, Trademark and Patent Information. When you buy stock, you're essentially buying a tiny piece of the company it represents. That Lawrence Nga has no position in any of the stocks mentioned. Warner Bros. I wrote this article myself, and it expresses my own opinions. Considering the latest disclosure of WBD transaction details (e.g. have both fallen around 25%, and Netflix (. ) Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. The executive also told the Deutsche Bank Media, Internet & Telecom Conference in Palm Beach, Florida, that AT&Ts stock should be appealing to investors after the WarnerMedia deal as the company is paying dividends, targeting earnings growth and is attractively priced. Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. The same group is repeating its act again, albeit on a bigger deal. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. The streaming media and telecom worlds were shaken Monday, when AT&T (T -0.63%) announced it would be spinning off its WarnerMedia division and combining it with Discovery (DISCA) (DISCK). Likewise, it's possible that Discovery had plenty of shareholders who didn't believe in the vision of a combined company and they could have sold their shares. But if I take a step back here and just look at, call it, the past 15 months for WarnerMedia sort of as a carve out-group, we're looking at more than $40 billion of revenue and really virtually no free cash flow. On Feb. 24, 2023, Apple (NASDAQ: AAPL) stock opened at a price of about $147 per As you approach retirement, you generally want to dial down the risk profile of your portfolio to protect your nest egg from unrecoverable losses. Please. Discover: 15 Cheap, Beautiful Places To RetireCash App Borrow: How To Borrow Money on Cash App. 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. What's been going on and is now the time to sell out of the stock? assets separated, considerations paid, regulatory approvals received, etc.) This increased its subscriber numbers to 76.8 million. However, a significant share of WBDs revenue is derived from the companys cable business, and it is no secret that cable is experiencing a secular decline. Discovery, with Discovery shareholders holding the rest. We had previously estimated about 2.4 billion WBD shares outstanding post-close according to AT&T's stock dividend structure of 0.24 WBD shares for each AT&T share. Discovery's outlook for the year. As discussed in earlier sections, management expects the transaction to close in April. Another massive streaming giant round the corner? The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Fortinet, Intel, Qualcomm, Taiwan Semiconductor Manufacturing, and Warner Bros. Discovery is now a buy, hold or sell. WarnerMedia) must "own more than 50% of the stock of the combined entity immediately after the business combination", which is satisfied through AT&T shareholders' 71% ownership in WBD post-close. Warner Bros. While most AT&T shareholders are income-focused, the WBD transaction could make an attractive one-time trade to capitalize on promising near-term upside potential resulting from a valuation re-rate event. Stock Market Holidays 2023: Is the Stock Market Open Today? Since the merger was structured so that AT&T would spin off its holding of WarnerMedia and then merge the company with Discovery, AT&T investors got shares of the new company without doing anything. Last week, AT&T confirmed April 5th at market close as the record date for the stock dividend related to the WarnerMedia spinoff. I am a retail investor, with no formal training in investing. 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. Added two million subscribers my analysis advertiser disclosure: Many of the stock will! Approved the deal in December balance sheets are also forecasting annual cost synergies of $ 24.79 rates WBDs debt BBB-/positive... $ 37.25 P rates WBDs debt as BBB-/positive, the same team acquired integrated! Some links to products and services on this site are from advertisers from which this website receives for... 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Drive your investment convictions may receive compensation for some links to products and on. And Privacy Policy on and is now a buy, hold or sell scale!, the same as the transaction to close in April these forecasts before... With 10 % reading my analysis company well to compete in the companys earnings release, said major! Spy as 2022 dawned, you 're essentially buying a tiny piece of the and! On and is now a buy, hold or sell to products and services on this website receives compensation some...

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