Discovery-WarnerMedia merger wins clearance from European Commission

The merger of Discovery and WarnerMedia has cleared another regulatory obstacle after the European Commission (EC) has granted unconditional antitrust clearance to Discovery’s $43 billion acquisition of AT&T’s WarnerMedia. AT&T will receive around US$43bn in a combination of cash, debt securities and WarnerMedia’s retention of certain debt. Meanwhile, AT&T shareholders will receive a 71% stake in the new company and Discovery shareholders will receive the remaining 29%.

Expected to close in mid-2022, the merger still needs to be approved by Discovery stockholders and pass other regulatory approvals including those in the States. Over 30 Democratic members of Congress have voiced concerns about reduced competition.

“This transaction raises significant antitrust 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,” said the letter to attorney general Merrick B Garland and assistant attorney general Jonathan Kanter.

Discovery president and CEO David Zaslav, who will lead the combined company, called the approval a “key milestone” on the road to finalising the transaction.

“Today we move one important step closer to creating Warner Bros Discovery, a premier entertainment company that will be one of the world’s leading investors in premium content and one positioned to serve consumers with what we believe will be the most complete content offering under one roof,” he said.

If the deal goes through it will bring brands such as HBO, CNN and HBO Max under the same umbrella as Discovery Channel, TLC, HGTV and Discovery+, creating a company that Zaslav says has the scale to take on “formidable” competitors, such as Disney and Netflix.

Headquartered in Belgium and Luxembourg, the EC is the executive branch of the European Union, responsible for proposing legislation, enforcing laws and overseeing administrative operations.

Discovery owns the Eurosport channels, HGTV, Food Network, and others. WarnerMedia has Turner Sports, TNT, TBS, CNN, Warner Bros., and HBO.Discovery also owns Olympic broadcasting rights across Europe from 2018 to 2024 as part of a $1.5 billion deal.

Discovery reported a 23% year-over-year revenue increase to $3.15 billion for its third quarter of 2021, adding 3 million subscribers, largely thanks to its Olympic coverage.