9 FEB 2022

US antitrust officials approve WarnerMedia-Discovery merger

The approval is a major hurdle dealmaker needed to clear ahead of the merger between the two media conglomerates, which is expected to be finalized later this spring. 

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Discovery's David Zaslav & AT&T's John Stankey

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According to multiple reports, Discovery and AT&T cleared a significant regulatory hurdle on Wednesday that put the two companies on a glide path to close a deal to combine Discovery and WarnerMedia in the next two or three months. The governmental regulatory waiting periods expired, satisfying the merger plan's closing condition initially announced on May 17, 2021. All that stands in the way of the Q2 merger is a Discovery shareholder vote, which should not be a problem. 

The approval is a major hurdle dealmakers needed to clear ahead of the merger between the two media conglomerates, which is expected to be finalized later this spring. The $43 billion deal, which was announced last May, notched unconditional antitrust clearance from the European Commission late last year, Reuters reported. The merger “satisfied the closing condition” as part of an antitrust review by the Department of Justice, Discovery said in a regulatory filing with the Securities and Exchange Commission. The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires companies to report large transactions to the Federal Trade Commission and the DOJ antitrust division for antitrust review.

The deal now heads to Discovery's shareholders for approval, which is expected given public statements of support from major financial backers like John Malone. Discovery will have a shareholder vote in the coming weeks, which is widely expected to pass, and will have to begin raising more than $30 billion in debt for the deal. The Discovery chief executive, David Zaslav, will take over the combined company when the merger is complete, potentially as soon as April. In the meantime, both companies are still moving independently of one another. Discovery, the owner of Eurosport, is in advanced negotiations to expand its sports business in Britain. 

The announcement on Wednesday also means that Discovery and WarnerMedia executives should be able to engage more deeply with one another and conduct more intimate business reviews, which they could not do before clearing the regulatory review. When closed, the deal will create one of the biggest media companies in the country, combining the assets of HBO, Warner Bros. television and film studios and the sports-heavy TNT and TBS networks with Discovery’s enormous library of nonfiction programming, which includes Oprah Winfrey’s OWN, HGTV, the Food Network, and Animal Planet. When the merger was announced by AT&T last May, the full valuation of the combined company was estimated at $130 billion.

AT&T faced intense government scrutiny when it purchased Time Warner in October 2016. That deal was fiercely contested by the Donald Trump-era Justice Department, which sued to block the deal and left it in limbo for 20 months before finally closing in June 2018. There were legitimate antitrust concerns about the deal from some corners, but critics charged that the lawsuit was political and ultimately motivated by Trump's disdain for CNN. AT&T eventually prevailed in court, but the government's objections severely delayed the deal. By comparison, Discovery and AT&T announced their plans to merge assets nine months ago. 

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