AT&T Dumps Time Warner Business Four Years After $85B Deal

After the hard-fought $85.4 billion deal for Time Warner was finally closed in 2018, AT&T is now spinning off its resulting WarnerMedia business unit as the carrier continues to focus on its legacy telecom business and boosting its balance sheet.

Just four years after closing on its acquisition of global entertainment and media powerhouse Time Warner Inc. for $85.4 billion in the hopes of becoming a media giant, AT&T is spinning off the business.

Time Warner, which became WarnerMedia under AT&T, is now merging with Discovery for the creation of a media and streaming conglomerate in a deal set to be finalized on Tuesday.

AT&T in 2016 first announced plans to add more value to its basic connectivity portfolio in the form of the purchase of Time Warner, which the company said would generate about 15 percent of the combined company’s revenues. The combination, however, didn’t prove fruitful for AT&T.

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The deal was finally closed after two years of back and forth with the U.S. Department of Justice losing its lawsuit to block the tie-up in 2018. Time Warner gave AT&T several major media properties, including CNN, HBO, HBO Now and HBO Go, but AT&T struggled to integrate the media business and the debt that the carrier took on negatively impacted the company.

One year after the megadeal closed, activist investor Elliott Management revealed a $3.2 billion stake in the Dallas-based telecom giant and laid out a series of changes intended to boost AT&T’s stock price and help the carrier return to its telecom roots. Elliott at the time called into question the carrier’s management team, as well as its aggressive acquisition strategy over the past several years that hadn’t added to AT&T’s core telecom business.

AT&T’s former CEO Randall Stephenson stayed on with the company until 2020 to help it work with Elliott to shed non-strategic assets to gain an additional $14 billion in profit. John Stankey, AT&T’s then- president and COO took over as CEO in July 2020. AT&T at the end of 2021 had nearly $180 billion in debt.

Dallas-based AT&T said it will use the $44 billion it receives as part of the deal to pay down debt and improve its balance sheet. The carrier has said it will be spending $5 billion on the buildout and deployment of 5G this year.

Via the terms of the deal, AT&T stockholders will receive shares in the merged company in addition to their existing AT&T shares. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the remaining 29 percent.

WarnerMedia CEO Jason Kilar is stepping down Friday as the deal is expected to be closed.

AT&T’s stock remained largely steady on Tuesday afternoon after dipping .89 percent.