Discovery and AT&T (TBB)received a long-awaited green light from the Justice Department on Wednesday, driving the two companies closer to completing Discovery’s takeover of WarnerMedia.
AT&T is planning to spin off CNN and the rest of WarnerMedia in the coming months, at which point Discovery will merge with WarnerMedia, creating a new juggernaut of streaming and cable content.
The final necessary step is a vote by Discovery shareholders. It is expected to take place in the coming weeks, and is regarded as a formality. The spin-off and merger is likely to take effect in April, according to executives with knowledge of the matter. AT&T has publicly said it expects the deal to close in the “second quarter” of the year.
When AT&T sought to buy WarnerMedia, then known as Time Warner, five years ago, the Donald Trump-era Justice Department sued to block the deal. There were legitimate antitrust concerns about the deal from some corners, but critics charged that the lawsuit was political and ultimately motivated by Trump’s disdain for CNN. AT&T eventually prevailed in court but the government’s objections severely delayed the deal.
Three years later, under pressure from investors to focus on its core connectivity business, AT&T reached an agreement with Discovery to spin off CNN, HBO, Warner Bros. and the rest of WarnerMedia.
AT&T and Discovery announced the deal last May. In the months since, regulators in other major countries have reviewed and approved the pending transaction, making the United States the final key approver.
This time around, the President Biden-era DOJ did not find any reasons to intervene on antitrust grounds. The government filed paperwork on Wednesday morning saying that the merger “satisfied the closing condition.”
The companies previously received a favorable ruling from the Internal Revenue Service that will make the transactions tax-free to stockholders.
Under the current plan, AT&T shareholders will own 71% of the combined Discovery and WarnerMedia, to be known as Warner Bros. Discovery, and Discovery CEO David Zaslav will run the company.
“This is a fantastic collection of assets,” Zaslav said in an interview on CNBC last week.
Zaslav has been preparing to take over for the past nine months, but has been limited by the legal constraints of the regulatory review process. He said on CNBC that he had not received “business reviews” of various parts of WarnerMedia yet.
With the Justice Department approval in hand, that process will now begin, and executives at the two companies will be able to speak in detail.
One of Zaslav’s challenges will involve CNN, given the abrupt exit last week of longtime CNN boss Jeff Zucker.
Zucker was forced out of his job after he admitted to a consensual romantic relationship with his longtime No. 2 Allison Gollust. Corporate policy requires such a relationship to be disclosed to human resources, which Zucker and Gollust had not previously done.
Zaslav and Zucker are longtime friends, and many observers had expected that Zucker would be a key member of Zaslav’s leadership team after the merger.
Now, Discovery needs to line up a new president of CNN Worldwide. Discovery executives view Zucker’s departure as a “fresh start” for the news organization, two people with knowledge of the matter told CNN Business.
Discovery intends to appoint a new leader of CNN at the time the deal takes effect, one of the two sources said.