AT&T, Discovery Stocks Fall 5% on News That WarnerMedia Deal Will Be a Spinoff

As opposed to a split

Peacemaker Suicide Squad
Warner Bros.

Shares in both AT&T and Discovery opened down roughly 5% apiece on Tuesday morning, following news that AT&T would indeed spin off WarnerMedia ahead of closing its $43 billion deal with Discovery, Inc.

There was previously a chance the two companies would execute a split instead to complete the mega-merger announced last year.

In addition to that decision, AT&T’s board of directors approved an annual dividend of $1.11 per AT&T share.

“In evaluating the form of distribution, we were guided by one objective — executing the transaction in the most seamless manner possible to support long-term value generation,” AT&T CEO John Stankey said Tuesday morning. “We are confident the spin-off achieves that objective because it’s simple, efficient and results in AT&T shareholders owning shares of both companies, each of which will have the ability to drive better returns in a manner consistent with their respective market opportunities.

“We believe that the remaining AT&T and the new WBD are two equities that the market will want to own and the markets to support those equities will develop,” Stankey continued. “Rather than try to account for market volatility in the near-term and decide where to apportion value in the process of doing an exchange of shares, the spin-off distribution will let the market do what markets do best. We are confident both equities will soon be valued on the solid fundamentals and attractive prospects they represent.”

That WBD refers to Warner Bros. Discovery’s expected stock-ticker symbol. Shares will trade on the NASDAQ Global Select Market.

The close of the pending deal will create a new, combined company, ending Discovery Inc.’s run as a standalone entity. AT&T will continue on as a telecom-focused business, trading under its current symbol, “T.”

As previously announced, longtime Discovery boss David Zaslav will run Warner Bros. Discovery and have a seat on its 13-person board. Discovery gets five additional board seats.

Warner Bros. Discovery is expected to close in the second quarter of 2022. AT&T has set March 11 as the date for a virtual analyst event intended “to provide additional insight and expectations for financial and operational performance of the communications company following the close of the pending WarnerMedia transaction.”