AT&T’s $43 Billion Plan to Merge WarnerMedia Unit With Discovery Is Given US Antitrust Clearance

The AT&T logo is seen on a smartphone in front of displayed Discovery and Warner Media logos in this illustration taken on May 17, 2021. (Dado Ruvic/Reuters)

The U.S. Department of Justice on Wednesday approved AT&T’s $43 billion plan to merge its WarnerMedia unit with Discovery, the companies announced on Wednesday in a Securities and Exchange Commission filing.

According to the filing (pdf), which was first obtained by TheWrap, Discovery and AT&T have “satisfied the closing condition” in the merger plan, which was initially announced on May 17, 2021.

“The HSR Act statutory waiting period has expired or otherwise been terminated, and any agreement not to consummate the transaction between the parties and the Federal Trade Commission or the Antitrust Division of the United States Department of Justice or any other applicable governmental entity, has also expired or otherwise been terminated,” the filing reads.

Now the deal, which received European Commission approval in December, is expected to close in the second quarter, pending approval from Discovery shareholders, which will likely not be an issue.

The deal to create a new media and entertainment giant called “Warner Bros. Discovery“ was announced last year and will see brands including HBO, CNN, and Cartoon Network, as well as two competing streaming services, Discovery+ and HBO Max, go under one global portfolio led by Discovery CEO David Zaslav.

It is expected that the deal will generate projected 2023 revenue of approximately $52 billion, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately $14 billion, and a free cash flow conversion rate of approximately 60 percent, AT&T said.

AT&T shareholders will own 71 percent of the new Warner Bros. Discovery company and Discovery shareholders would own 29 percent of the new company.

However, the deal has raised “antitrust concerns” from a number of lawmakers, including Sen. Elizabeth Warren (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) who sent a letter (pdf) to Attorney General Merrick Garland and DOJ antitrust chief Jonathan Kanter in December voicing their concerns.

“In particular, the merger threatens to enhance the market power of the combined firm and substantially lessen competition in the media and entertainment industry, harming both consumers and American workers,” lawmakers said.

“In light of these concerns, we respectfully urge the Department to conduct a thorough review of this transaction to ensure that it does not harm American consumers and workers by illegally harming competition.”

President Joe Biden in July signed an executive order aimed at increasing competition in the U.S. economy, which includes 72 initiatives by over a dozen federal agencies aimed at promoting competition.

The order notes that “excessive market concentration threatens basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers,” a point that Warren and Ocasio-Cortez referenced in their letter.

In response, AT&T CEO John Stankey defended the merger, saying during an appearance at the virtual UBS Global Technology, Media, and Telecom Conference that, “What’s been articulated in those letters is really unfounded.”

“Having been through a number of these [transactions] in my career, getting letters from members of Congress is not unusual. … When you have a lot of members of Congress, there’s always going to be those that have a different lens they want to put on something,” Stankey added.

The merger comes as AT&T has been selling off assets to alleviate debt, having ended the fourth quarter with net debt of $156.2 billion, giving it a net debt to adjusted EBITDA ratio of about 3.22 times.

The company said it expects its debt ratio to drop to 2.5 times by the end of 2023 and that it would consider share buybacks if the ratio is reduced further.

Reuters contributed to this report.