AT&T on Monday announced plans to merge its WarnerMedia content unit, which includes HBO, TNT, CNN, and Warner Bros., with Discovery.
The deal paves the way for a new streaming giant that could compete with Netflix and Disney.
AT&T intends to split off the assets it acquired when it bought Time Warner for $85 billion in 2018.
AT&T would receive $43 billion in cash, debt securities, and WarnerMedia's retention of certain debt under the proposed deal, according to a filing with the Securities and Exchange Commission. AT&T shareholders are set to receive stock equating to 71% of the new company, with Discovery shareholders owning the remainder.
The transaction, which has already been approved by both the AT&T and Discovery boards, is expected to close in mid-2022.
In its SEC filing, AT&T said it expected the new company to have a 2023 revenue of about $52 billion.
AT&T said the deal would create at least $3 billion in expected "cost synergies" annually for the new company, which could mean job cuts.
Discovery's president and CEO, David Zaslav, is set to lead the proposed new company. Its board of directors would have 13 members: seven appointed by AT&T and six appointed by Discovery.
The company said it would combine WarnerMedia's entertainment, sports, and news assets with Discovery's entertainment and sports businesses to create "a premier, standalone global entertainment company."
AT&T said the new company would be able to invest in more original content for its streaming services, create new opportunities for underrepresented storytellers and independent creators, and create more family-friendly nonfiction content.
AT&T had been planning to expand HBO Max internationally, and the Discovery combination could be a big boost to those plans. Discovery owns European rights to the Olympics and owns Eurosport.
AT&T, which has been led by John Stankey since July, has seen steady growth of HBO Max since it launched last year. It gained almost 3 million subscribers in the first quarter of 2021, bringing total subscribers to 9.7 million. The platform is set to expand its reach from just the US, launching in Latin America next month. In total, HBO Max and HBO combined have about 64 million subscribers globally, compared with Netflix's 208 million.
Discovery Plus launched in the increasingly crowded streaming market in January. The streaming platform is home to 55,000 episodes of shows from brands like HGTV, Food Network, TLC, A&E, History Channel, and the Discovery Channel, which airs the popular "Shark Week" series each year. Discovery Plus also features content from the BBC.
Speaking at a video press conference on Monday morning, Zaslav said that combined, WarnerMedia and Discovery already spent more than $20 billion annually on content. That's a larger annual content budget than Netflix, which said in April that it expected to spend about $17 billion on content in 2021.
Zaslav, who said the proposed company would announce a new name in the coming days, explained that the rationale of the deal was to create "the No. 1 media company in the world" by leaning into news, sports, entertainment, and nonfiction content.
