Discovery-WarnerMedia merger wins clearance from European Commission

The merger of Discovery and WarnerMedia has cleared another regulatory obstacle after the European Commission (EC) granted the blockbuster deal unconditional antitrust clearance.

David Zaslav

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.

The deal, revealed in May, 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. Meanwhile, AT&T shareholders will receive a 71% stake in the new company and Discovery shareholders will receive the remaining 29%.

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.

While the proposed transaction has now received EC approval, it will still need to clear several other regulatory hurdles, namely approval from the US Department of Justice, if it is to come to fruition.

Earlier this month a group of more than 30 US Congress Democrats raised antitrust concerns around the proposed deal, calling on the Department of Justice to carefully examine the merger on the grounds that it will limit 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.

AT&T CEO John Stankey countered by saying: “What has been articulated in those letters is really unfounded,” adding that there is “nothing unusual about this transaction” from an antitrust perspective.

On Wednesday, Discovery reiterated that it expects the deal to close in mid-2022. The transaction remains subject to approval by Discovery stockholders, while no approval is required by AT&T stockholders.