UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 11, 2022 (
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.01 Completion of Acquisition or Disposition of Assets.
On April 8, 2022, AT&T Inc., a Delaware corporation (“AT&T”), completed the previously disclosed transactions contemplated by (i) that certain Agreement and Plan of Merger, dated as of May 17, 2021 (as amended, the “Merger Agreement”), by and among AT&T, Magallanes, Inc., a Delaware corporation and prior to the Merger (as defined below) wholly owned subsidiary of AT&T (“Spinco”), Discovery, Inc., a Delaware corporation (“Discovery”), which has been renamed Warner Bros. Discovery, Inc. (“WBD”) in connection with the Merger, and Drake Subsidiary, Inc., a Delaware corporation and wholly owned subsidiary of Discovery (“Merger Sub”), (ii) that certain Separation and Distribution Agreement, dated as of May 17, 2021 (as amended, the “Separation Agreement”), by and among AT&T, Spinco and Discovery, and (iii) certain other agreements in connection with the proposed transactions contemplated by the Merger Agreement and the Separation Agreement. Specifically, (1) AT&T transferred the business, operations and activities that constitute the WarnerMedia segment of AT&T, subject to certain exceptions as set forth in the Separation Agreement (the “WarnerMedia Business”), to Spinco (the “Separation”), (2) AT&T distributed to its stockholders all of the shares of common stock, par value $0.01 per share, of Spinco (the “Spinco Common Stock”) held by AT&T by way of a pro rata dividend such that each holder of shares of common stock, par value $1.00 per share, of AT&T (the “AT&T Common Stock”) was entitled to receive one share of Spinco Common Stock for each share of AT&T common stock held as of the record date, April 5, 2022 (the “Distribution”), and (3) Merger Sub was merged with and into Spinco, with Spinco as the surviving corporation (the “Merger” and together with the Separation and the Distribution, the “Transactions”). Upon completion of the Merger, Spinco became a wholly owned subsidiary of WBD and the holders of Spinco Common Stock were entitled to receive 0.241917 shares of WBD common stock (the “Exchange Ratio”) for each share of Spinco Common Stock held on the closing date.
As a result of the completion of the Transactions, holders of AT&T Common Stock (as holders of Spinco Common Stock immediately following the Distribution) own approximately 71% of the outstanding capital stock of WBD, on a fully diluted basis (computed using the treasury method).
For additional information regarding the WarnerMedia Business, please refer to the Form 10 and the information statement included therein and the final information statement made available in connection with the Transactions, which was filed by Spinco as Exhibit 99.1 to its Current Report on Form 8-K dated March 28, 2022.
| Item 3.02 | Unregistered Sales of Equity Securities. |
On April 5, 2022, AT&T purchased approximately 120.75 million shares of AT&T Common Stock held by certain of its wholly-owned subsidiaries and trusts for which the Benefit Plan Committee of AT&T acts as trustee (the “Sellers”) (such purchase, the “Share Purchase” and such purchased shares, the “Purchased Shares”). In consideration for the Purchased Shares and subject to the consummation of the Merger, AT&T agreed to issue to each Seller, in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, at such time as AT&T determines following the consummation of the Merger, a number of shares of AT&T Common Stock equal to the sum of (a) the number of Purchased Shares, (b) a number of additional shares of AT&T Common Stock equal to the quotient obtained by dividing (i) the product of (1) the number of Purchased Shares, (2) the Exchange Ratio and (3) the closing price of the shares of WBD common stock on the Nasdaq Global Select Market on April 11, 2022 by (ii) the closing price of AT&T Common Stock on The New York Stock Exchange on April 11, 2022, (c) the value of any interim dividends (other than the Distribution) and (d) the value of any cash in lieu of fractional shares.
| Item 7.01 | Regulation FD Disclosure. |
On April 8, 2022, AT&T and Discovery issued a joint press release announcing the completion of the Transactions, furnished as Exhibit 99.1 hereto.
The information in this Item 7.01, including the exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing by AT&T under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.
| Item 8.01 | Other Events. |
On April 8, 2022, AT&T also announced, among other things, the receipt of the Special Cash Payment (as defined in the Separation Agreement), subject to certain post-closing adjustments, in connection with the completion of the Transactions of approximately $28.9 billion that, combined with the Additional Amount (as defined in the Separation Agreement) of $10.0 billion resulted in net cash proceeds to AT&T from the Transactions of approximately $38.9 billion, in addition to WBD’s assumption of approximately $1.6 billion of existing debt of the WarnerMedia Business.
On March 31, 2022, AT&T issued a notice for the redemption in full of all of the outstanding $1,961,516,000 aggregate principal amount of its 3.000% Global Notes due June 30, 2022 (CUSIP No. 00206RCM2) (the “June 30 Notes”). The June 30 Notes will be redeemed on April 30, 2022 at 100% of the principal amount of the June 30 Notes plus accrued but unpaid interest on the principal amount of such June 30 Notes to, but not including, the redemption date.
On April 11, 2022, AT&T delivered irrevocable notice to Bank of America, N.A. (“Bank of America”), as the lender to the $2 billion Term Loan Credit Agreement, dated as of March 19, 2021, by and among AT&T and Bank of America, as amended by Amendment No. 1 to the Term Loan Credit Agreement, dated as of December 15, 2021 (as amended, the “Bilateral Term Loan”), containing (i) a $1 billion term loan facility (the “Tranche A Facility”) and (ii) a $1 billion term loan facility (the “Tranche B Facility”), that AT&T will make an optional prepayment in full of the outstanding amounts of each of the Tranche A Facility and Tranche B Facility, as follows:
| (i) | for advances under the Tranche A Facility, the aggregate amount of the prepayment is $1,000,000,000; and |
| (ii) | for advances under the Tranche B Facility, the aggregate amount of the prepayment is $1,000,000,000. |
After the repayment is applied to the Tranche A Facility and the Tranche B Facility, all outstanding borrowings and all unpaid fees under the Bilateral Term Loan will be paid in full and the Bilateral Term Loan will be terminated in its entirety.
On April 11, 2022, AT&T also delivered irrevocable notice to Bank of America, as agent for the lenders party to the $7.350 billion Amended and Restated Term Loan Credit Agreement, dated as of March 2, 2022 by and among AT&T, Bank of America, and other initial lenders named therein (the “Syndicated Term Loan”), that AT&T will make an optional prepayment of the full outstanding amount of the Syndicated Term Loan. The aggregate amount of the prepayment is $7,350,000,000. After the repayment is applied, all outstanding borrowings and all unpaid fees under the Syndicated Term Loan will be paid in full and the Syndicated Term Loan will be terminated in its entirety.
On April 11, 2022, AT&T also made an optional prepayment of the full amount outstanding pursuant to a private financing (the “Private Financing”). The aggregate amount of the prepayment is $750,000,000. After the repayment is applied, all outstanding borrowings and all unpaid fees under the Private Financing will be paid in full.
On April 11, 2022, AT&T issued a notice for the redemption in full of all of the outstanding (i) $1,118,743,000 aggregate principal amount of its 2.625% Global Notes due December 1, 2022 (CUSIP No. 00206RBN1); (ii) $411,202,000 aggregate principal amount of its 4.050% Global Notes due December 15, 2023 (CUSIP No. 00206RHP0 ); (iii) $319,836,000 aggregate principal amount of its 3.800% Global Notes due March 1, 2024 (CUSIP No. 00206RDP4); (iv) $530,535,000 aggregate principal amount of its 3.900% Global Notes due March 11, 2024 (CUSIP No. 00206RCE0); (v) $1,207,937,000 aggregate principal amount of its 4.450% Global Notes due April 1, 2024 (CUSIP No. 00206RDC3); (vi) $207,440,000 aggregate principal amount of its 3.550% Global Notes due June 1, 2024 (CUSIP No. 00206RHR6); (vii) $546,726,000 aggregate principal amount of its 3.950% Global Notes due January 15, 2025 (CUSIP No. 00206RDD1); (viii) $2,324,674,000 aggregate principal amount of its 3.400% Global Notes due May 15, 2025 (CUSIP No. 00206RCN0); (ix) $563,125,000 aggregate principal amount of its 3.600% Global Notes due July 15, 2025 (CUSIP No. 00206RHS4); and (x) $1,811,405,000 aggregate principal amount of its 4.125% Global Notes due February 17, 2026 (CUSIP No. 00206RCT7) (each series of notes described in sub-sections (i) – (x), the “Make-Whole Notes” and, together with the June 30 Notes, the “Notes”).
The Make-Whole Notes will be redeemed on the redemption dates set forth in the notices of redemption, at “make whole” redemption prices to be calculated as set forth in the respective redemption notices.
On and after the date of redemption, each series of Notes will no longer be deemed outstanding, interest on each series of Notes will cease to accrue and, except for the right to receive the redemption payment upon surrender of each series of Notes, all rights of the holders of each series of Notes will terminate. The notices of redemption specifying the terms, conditions and procedures for each redemption is available through The Depository Trust Company or The Bank of New York Mellon Trust Company, N.A., as paying agent for each series of Notes. The foregoing does not constitute a notice of redemption for any series of Notes.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| 99.1 | Joint Press Release of AT&T Inc., and Discovery, Inc., dated April 8, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AT&T INC. | ||||||
| Date: April 11, 2022 | By: | /s/ Pascal Desroches | ||||
| Pascal Desroches | ||||||
| Senior Executive Vice President and Chief Financial Officer | ||||||
Exhibit 99.1
Discovery and AT&T Close WarnerMedia Transaction
Combination of Discovery and WarnerMedia Creates
Warner Bros. Discovery, Global Leader in Entertainment and Streaming
Warner Bros. Discovery to Begin Trading on the Nasdaq as “WBD” on Monday, April 11
NEW YORK and DALLAS, April 8, 2022 — Today Discovery, Inc. and AT&T Inc.* (NYSE:T) announced that they have closed their transaction to combine the WarnerMedia business with Discovery. The combination creates a premier standalone global media and entertainment company, Warner Bros. Discovery, Inc., which will begin trading on the Nasdaq with the start of trading on Monday, April 11, under the new ticker symbol “WBD.”
Warner Bros. Discovery will create and distribute the world’s most differentiated and complete portfolio of content, brands and franchises across television, film and streaming. The new company combines WarnerMedia’s premium entertainment, sports and news assets with Discovery’s leading non-fiction and international entertainment and sports businesses, including Discovery Channel, discovery+, Warner Bros. Entertainment, CNN, CNN+, DC, Eurosport, HBO, HBO Max, HGTV, Food Network, Investigation Discovery, TLC, TNT, TBS, truTV, Travel Channel, MotorTrend, Animal Planet, Science Channel, New Line Cinema, Cartoon Network, Adult Swim, Turner Classic Movies and others.
| © 2022 AT&T Intellectual Property. All rights reserved. AT&T and the Globe logo are registered trademarks of AT&T Intellectual Property. |
“Today’s announcement marks an exciting milestone not just for Warner Bros. Discovery but for our shareholders, our distributors, our advertisers, our creative partners and, most importantly, consumers globally,” said David Zaslav, Warner Bros. Discovery chief executive officer. “With our collective assets and diversified business model, Warner Bros. Discovery offers the most differentiated and complete portfolio of content across film, television and streaming. We are confident that we can bring more choice to consumers around the globe while fostering creativity and creating value for shareholders. I can’t wait for both teams to come together to make Warner Bros. Discovery the best place for impactful storytelling.”
“We are at the dawn of a new age of connectivity, and today marks the beginning of a new era for AT&T,” said John Stankey, AT&T chief executive officer. “With the close of this transaction, we expect to invest at record levels in our growth areas of 5G and fiber, where we have strong momentum, while we work to become America’s best broadband company. At the same time, we’ll sharpen our focus on returns to shareholders. We expect to invest for growth, strengthen our balance sheet and reduce our debt, all while continuing to pay an attractive dividend that puts us among the top dividend paying stocks in America.
“In WarnerMedia, Discovery inherits a talented and innovative team and a dynamic growing and global company that is well positioned to lead the transformation that’s taking place across media and entertainment, direct-to-consumer distribution and technology. The combination of the two companies will strengthen WarnerMedia’s established and leading position in media and
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streaming. And our shareholders will now have a significant stake in Warner Bros. Discovery and its future successes. We look forward to seeing what the WBD team accomplishes with these industry-leading assets.”
Under terms of the agreement, which was structured as a Reverse Morris Trust transaction, at close AT&T received $40.4 billion in cash and WarnerMedia’s retention of certain debt. Additionally, shareholders of AT&T received 0.241917 shares of WBD for each share of AT&T common stock they held at close. As a result, AT&T shareholders received 1.7 billion shares of WBD, representing 71% of WBD shares on a fully diluted basis. Discovery’s existing shareholders own the remainder of the new company. In addition to their new shares of WBD common stock, AT&T shareholders continue to hold the same number of shares of AT&T common stock they held immediately prior to close.
About DISCOVERY
Discovery, Inc. (Nasdaq: DISCA, DISCB, DISCK) is a global leader in real life entertainment, serving a passionate audience of superfans around the world with content that inspires, informs and entertains. Discovery delivers over 8,000 hours of original programming each year and has category leadership across deeply loved content genres around the world. Available in 220 countries and territories and nearly 50 languages, Discovery is a platform innovator, reaching viewers on all screens, including TV Everywhere products such as the GO portfolio of apps; direct-to-consumer streaming services such as discovery+, Food Network Kitchen and MotorTrend OnDemand; digital-first and social content from Group Nine Media; a landmark natural history and factual content partnership with the BBC; and a strategic alliance with PGA TOUR to create the international home of golf. Discovery’s portfolio of premium brands includes Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, MotorTrend, Animal Planet, Science Channel, and the multi-platform JV with Chip and Joanna Gaines,
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Magnolia Network, as well as OWN: Oprah Winfrey Network in the U.S., Discovery Kids in Latin America, and Eurosport, the leading provider of locally relevant, premium sports and Home of the Olympic Games across Europe. For more information, please visit corporate.discovery.com and follow @DiscoveryIncTV across social platforms.
About Warner Bros. Discovery
Warner Bros. Discovery (NASDAQ: WBD) is a leading global media and entertainment company that creates and distributes the world’s most differentiated and complete portfolio of content and brands across television, film and streaming. Available in more than 220 countries and territories and 50 languages, Warner Bros. Discovery inspires, informs and entertains audiences worldwide through its iconic brands and products including: Discovery Channel, discovery+, CNN, CNN+, DC, Eurosport, HBO, HBO Max, HGTV, Food Network, Investigation Discovery, TLC, TNT, TBS, truTV, Travel Channel, MotorTrend, Animal Planet, Science Channel, Warner Bros. Pictures, New Line Cinema, Cartoon Network, Adult Swim, Turner Classic Movies and others. For more information, please visit www.wbd.com.
*About AT&T
We help more than 100 million U.S. families, friends and neighbors connect in meaningful ways every day. From the first phone call 140+ years ago to our 5G wireless and multi-gig internet offerings today, we @ATT innovate to improve lives. For more information about AT&T Inc. (NYSE:T), please visit us at about.att.com. Investors can learn more at investors.att.com.
AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information is available at about.att.com. © 2022 AT&T Intellectual Property. All rights
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reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.
Statement Concerning Forward-Looking Statements
Information set forth in this communication, including any financial estimates and statements as to the expected timing, completion and effects of the transaction between AT&T, Magallanes, Inc. (“Spinco”), and Discovery constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These estimates and statements are subject to risks and uncertainties, and actual results might differ materially. Such estimates and statements include, but are not limited to, statements about the benefits of the transaction, including future financial and operating results, the combined Spinco and Discovery company’s plans, objectives, expectations and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the management of AT&T and Discovery and are subject to significant risks and uncertainties outside of our control. Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements are the following: risks that the anticipated tax treatment of the transaction is not obtained; risks related to litigation brought in connection with the transaction; the risk that the integration of Discovery and Spinco being more difficult, time consuming or costly than expected; risks related to financial community and rating agency perceptions of each of AT&T and Discovery and its business, operations, financial condition and the industry in which it operates; risks related to disruption of management time from ongoing business operations due to the merger; failure to realize the benefits expected from the merger; effects of the announcement, pendency or completion of the merger on the ability of AT&T, Spinco or Discovery to retain customers and retain and hire
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key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally; and risks related to the potential impact of general economic, political and market factors on the companies or the transaction. The effects of the COVID-19 pandemic may give rise to risks that are currently unknown or amplify the risks associated with the foregoing factors.
These risks, as well as other risks associated with the transaction, are more fully discussed in the proxy statement/prospectus included in the registration statement on Form S-4 filed by Discovery with the SEC in connection with the transaction, the registration statement on Form 10 filed by Spinco with the SEC in connection with the transaction and the information statement made available to AT&T’s shareholders in connection with the transaction. Discussions of additional risks and uncertainties are contained in AT&T’s and Discovery’s filings with the Securities and Exchange Commission. Neither AT&T nor Discovery is under any obligation, and each expressly disclaims any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Persons reading this announcement are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof.
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