AT&T announced that it will spin off its interest in WarnerMedia as part of its planned deal that will create Warner Bros. Discovery.
AT&T has been trying to decide how best to engineer the transaction and opted for the spin off rather than making an exchange offer of distribution.
The deal is expected to close in the second quarter and would leave current AT&T shareholders owning 71% of Warner Bros. Discovery.
Also: Spending on HBO Max Hurts Profits at AT&T’s WarnerMedia Unit
AT&T’s board also voted that the company would pay a $1.11 a share annual dividend after the WarnerMedia deal closes. The payout is designed to be about 40% of AT&T’s projected cash flow.
“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,” said AT&T CEO John Stankey. “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.”
Also: AT&T CEO Sees Netflix Price Hike Helping HBO Max Grow
After the deal closes, WBD’s common stock is expected to be listed on the NASDAQ Global Select Market under the ticker symbol WBD. All classes of shares of Discovery capital stock will be converted and reclassified into common shares of WBD. AT&T will continue to trade on the NYSE under the ticker symbol T.
“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 said. “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.” ■
