Discovery, WarnerMedia win Justice Department clearance for merger

The proposed Warner Bros. Discovery logo.
The proposed Warner Bros. Discovery logo.

Discovery Inc.’s takeover of WarnerMedia moved closer to completion after the U.S. Justice Department declined to challenge the deal.

In a regulatory filings Wednesday, Discovery and AT&T said the time period had expired for the Justice Department and the Federal Trade Commission to try to block the $43-billion merger of Discovery and WarnerMedia, the parent company of HBO, CNN, TBS, Cartoon Network and the Warner Bros. film and TV studio.

AT&T currently owns WarnerMedia, but the cellphone giant has been eager to exit Hollywood after its failed foray into the entertainment business.


The Dallas-based telecommunications company acquired WarnerMedia just three and a half years ago after a protracted court battle with the Justice Department over whether that deal violated U.S. antitrust laws. Then-President Trump, who despised CNN because of its unfavorable coverage of him, was insistent that AT&T’s purchase of the WarnerMedia assets be stopped.

This time around, the Justice Department did not intervene. Instead, federal officials have been looking more closely at Silicon Valley giants, Facebook, Google and Amazon, the latter of which is trying to acquire the MGM studio.

Despite opposition from more than 30 Democratic members of Congress who in December said the planned consolidation “raises significant antitrust concerns,” President Biden’s Justice Department, led by Atty. General Merrick Garland, showed little interest in challenging the tie-up between two traditional media companies.

Approval from the Justice Department was one of the final hurdles the two companies needed to clear in order to finalize the union they announced last May.

With this week’s development, the companies said in an Securities and Exchange Commission filing that they have now satisfied closing conditions.

Discovery shareholders still must vote on the tie-up.

Shareholder approval is largely certain because investors with more than 40% of the vote — cable pioneer John Malone and the Advance Newhouse media company — already have signaled their support. The merger should be complete in April or May.


The landmark deal comes amid upheaval in the industry as traditional media companies grapple with declining ratings, consumer cord-cutting and the rising threat posed by Netflix, Hulu, Disney+ and other streaming services. Since its launch in May 2020, WarnerMedia’s HBO Max streaming service has gained traction and has more than 73 million subscribers.

The combination will bring together some of the biggest names in television — HBO, CNN, HGTV, Animal Planet and Food Network — and the Warner Bros. movie studio. Discovery’s streaming service, Discovery+, has also carved out a potent niche for viewers who love its crime stories and comfort food programming.

At the close, AT&T will spin off WarnerMedia and exit Hollywood. Its shareholders would own 71% at the spinoff, and Discovery shareholders will hold 29% of the new entity, which will be called Warner Bros. Discovery.

AT&T will receive $43 billion in cash, debt securities and other consideration so the company can pay down debt.

AT&T has been unwinding entertainment assets so that it can focus on its core wireless business. Last August, the company spun off its DirecTV subsidiary into a joint venture managed by private equity giant TPG. Including the 2015 DirecTV and 2018 WarnerMedia takeovers, AT&T spent $150 billion to buy companies that it soon will no longer control.

In December, AT&T won a ruling from the Internal Revenue Service that the WarnerMedia spinoff would be a tax-free event for its shareholders. That same month, the European Commission approved the merger.

David Zaslav
Discovery CEO David Zaslav will run the combined company after the takeover of WarnerMedia.
(Richard Drew / Associated Press)

The deal came together one year ago, after Discovery Chief Executive David Zaslav sent a Feb. 13, 2021, email message to AT&T Chief Executive John Stankey, grousing about lockdown restrictions that caused him to miss the AT&T Pebble Beach Pro-Am golf tournament. The two men began talking about the future of media and eventually started meeting secretly at Zaslav’s Greenwich Village brownstone to hammer out deal terms. The boards of AT&T and Discovery approved the deal in May 2021.

Zaslav, 61, will run the combined company. Current WarnerMedia CEO Jason Kilar is expected to leave shortly after the takeover.

Zaslav is a veteran TV executive with more than 30 years of experience in media. He joined NBC in 1989 to build CNBC and has been leading Discovery since 2007. A lawyer by training, he helped take Discovery public in 2008 and was an architect of its transformative $12-billion purchase of Food Network and HGTV in 2018.

He has been eager to be a bigger player in Hollywood.

WarnerMedia “is such a historic company and a great set of assets and it fits so well with what we’ve built over the last 15 years that I’ve been at Discovery,” Zaslav told the Los Angeles Times last year.