Amazon reportedly in talks to acquire Hollywood film & TV studio MGM
• New name for combined AT&T/Discovery assets to be revealed in next few weeks
• Discovery president & CEO David Zaslav to lead new company
• AT&T will receive US$43b of cash, debt securities, and WarnerMedia’s retention of certain debt, and AT&T’s shareholders would receive stock representing 71% of new company
• Discovery shareholders will own 29% of the new company
• Merger would create $3b in cost synergies annually for the new company
Merger mania
The move by AT&T to offload assets it acquired during its acquisition of Time Warner three years ago comes as other companies jostle for production company assets in a world where the hottest entertainment business model is direct to consumer.
AT&T is selling the WarnerMedia brands for about US$43b after paying close to double that for Time Warner in 2018.
Could Amazon be the next acquirer of a Hollywood studio? As Amazon Prime Video executives hosted a Sydney showcase event where they introduced what they rightly described as a “monster schedule”, executives in the US were reportedly circling MGM. According to Variety the price tag for MGM was thought to be in the $5b-$10b range, with Amazon considering an offer of $9b.
See also: Amazon to spend $150m on 14 Australian original productions creating 2,500 jobs
Recent Hollywood mergers
WarnerMedia – Discovery $43b (2021 – deal to close in 2022)
Univision – Grupo Televisa $5b (2021)
CBS – Viacom $12b (2019)
Disney – Fox $71b (2019)
Sinclair – Fox Sports Networks $10b (2019)
AT&T – Time Warner $85b (2018)
Comcast – Sky TV $39b (2018)
Discovery – Scripps Networks $12b (2018)
Source: Variety
WarnerMedia – Discovery deal highlights
A stronger competitor in global streaming
The new company will compete globally in the fast-growing direct-to-consumer business – promising compelling content to DTC subscribers across its portfolio, including HBO Max and the recently launched discovery+. The transaction will combine WarnerMedia’s library with Discovery’s global footprint, local-language content and regional expertise across more than 200 countries and territories. The new company will be able to invest in more original content for its streaming services, enhance the programming options across its global linear pay TV and broadcast channels, and offer more innovative video experiences and consumer choices.
Entertainment brand powerhouse
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 popular brands in the world under one global portfolio, including: HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, the Turner Networks, TNT, TBS, Eurosport, Magnolia, TLC, Animal Planet, ID and many more.
Discovery CEO David Zaslav and Oprah Winfrey
Leadership, governance and structure
The companies announced that Discovery President and CEO David Zaslav will lead the proposed new company with a management team and operational and creative leadership from both companies.
A day after the merger was confirmed, Discovery announced CEO Zaslav had his contract extended until 2027: “The extension was made in connection with the definitive agreement between AT&T Inc. and Discovery Inc. to combine WarnerMedia’s premium entertainment, sports and news assets with Discovery’s leading nonfiction and international entertainment and sports businesses to create a premier, standalone global entertainment company,” Discovery explained.
Discovery’s current multiple classes of shares will be consolidated to a single class with one vote per share.
The new company’s board of directors will consist of 13 members, 7 initially appointed by AT&T, including the chairperson of the board; Discovery will initially appoint 6 members, including CEO David Zaslav.
Outgoing WarnerMedia CEO Jason Kilar had only been in new job since May 1, 2020. KIlar oversaw the decision to release movies simultaneously in cinemas and on HBO Max last December. The move was thought to be a major mistake by many as it would eat into into a major revenue stream. Kilar will depart well compensated though. He was granted stock options worth US$48m a year ago and he is expected to get at least a minimum of $5m plus to see out his contract.
Transaction highlights
The transaction is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals.