Discovery shareholder vote brings WarnerMedia merger a step closer

Discovery’s shareholders have approved its merger with WarnerMedia, paving the way for the deal to officially close early in the second quarter.

David Zaslav

While the approval was a formality, because the company’s largest shareholders, John C Malone and US media company Advance/Newhouse, have already given the deal their blessing, it marks one of the final check boxes in a hugely complex transaction that has taken the better part of a year.

The approval came on Friday during a special meeting of Discovery shareholders. WarnerMedia parent company AT&T’s shareholders do not need to vote on the deal, which in recent months has cleared its main regulatory hurdles in Europe and the US.

First revealed last May, the mega-merger will see AT&T spin off WarnerMedia and combine it with Discovery. AT&T will receive around US$43bn in a combination of cash, debt securities and WarnerMedia’s retention of certain debt. AT&T shareholders will receive a 71% stake in the new company and Discovery shareholders the remaining 29%.

The combination will bring together WarnerMedia-owned brands such as HBO, HBO Max and CNN and Discovery brands including HGTV, TLC and Discovery+ under the Warner Bros Discovery umbrella.

While the companies have been tight-lipped about the specifics of the integration strategy, Discovery president and CEO David Zaslav, who will lead the combined entity, has said the intention is to combine WarnerMedia and Discovery’s assets under a single streaming offering that will aim to take on Netflix and Disney.

As with any merger of this scale, there is significant interest in the composition of the leadership team, which has not been confirmed yet. The only appointment that Zaslav has so far presided over is the appointment of Chris Licht as chairman and CEO of CNN Global, following the departure of Jeff Zucker last month.

Over the past 10 months, Zaslav has been on an extensive listening tour to understand the intricacies of the WarnerMedia business and legacy. The exec is also moving to LA as he prepares to lead Warner Bros Discovery.

During Discovery’s year-end investor call last month, Zaslav emphasised that the merged entity will not look to simply outspend rivals Disney and Netflix in an attempt to win the so-called streaming wars.

“Our goal is to compete with the leading streaming services, not to win the spending war,” said Zaslav at the time, noting that Warner Bros Discovery will employ a three-pronged streaming strategy focused on subscription-only, ad-light and eventually a free digital service.

He has previously said that he believes the new company will have enough scale to compete in a market that will continue to see “substantial consolidation” over the next five years.