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Photo: Ronald Martinez/Getty Images

AT&T is unwinding a huge part of its $84 billion acquisition of Time Warner, less than three years after it closed.

Driving the news: AT&T this morning announced that it will merge its WarnerMedia properties with Discovery Inc.'s media assets.

  • AT&T's contributions will include cable networks CNN, TNN, TNT, Cartoon Network and HBO, plus streaming service HBO Max. Discovery's will include its Discovery-branded content, TLC, Food Network, Eurosport and its Discovery+ streaming service.
  • The deal is expected to close in the middle of next year, via a joint venture that would have projected 2023 revenue of $52 billion and adjusted EBITDA of around $14 billion.

The big winner is Elliott Management, the activist investor that in 2019 took a $3.2 billion stake in AT&T and publicly argued that the Time Warner acquisition didn't make strategic sense.

  • Elliott later signed a ceasefire with new AT&T CEO John Stankey, who agreed to spin off DirecTV via a deal with TPG Capital.
  • There were reports in November that Elliott divested its AT&T stake, but my understanding is that it just sold off its small amount of common stock, but maintains most of its swaps. It subsequently purchased new common stock, to be reflected in a 13F being filed today.
  • It does not appear that AT&T reached out to private equity firms to help buttress the deal.

The big loser is former AT&T CEO Randall Stephenson. Not only were Time Warner and DirecTV his two biggest acquisitions, but his failed pursuit of T-Mobile triggered a massive termination fee that financially strengthened a smaller rival and arguably caused AT&T to sell off its wireless spectrum.

The big comp is Verizon, which also has a (relatively) new CEO who views networking as the crown jewel and content as a pricey distraction.

The big note is how rushed this morning's announcement felt, despite some background insistence that it wasn't, per Axios media reporter Sara Fischer.

  • They didn't announce the new company's name, instead saying they'll drop it "later this week."
  • No disclosed decisions yet on if the two streaming services will be merged.
  • Reporters had 30 minutes' notice this morning of the Zoom call.
  • No clarity on the future of WarnerMedia boss Jason Kilar, who was notably absent from the press release. Stankey simply said that Discovery CEO David Zaslav — who will run the new business — has lots of discussions ahead of him.

The bottom line: Two things you can always count on after acquiring Time Warner are big controversy and big regrets.

Editor's note: This post was corrected to reflect that Elliott Management took a $3.2 billion stake in AT&T in 2019 (not in 2020).

Go deeper

May 16, 2021 - Economy & Business

AT&T in talks with Discovery to combine media assets

Illustration: Annelise Capossela/Axios

AT&T is in talks with media giant Discovery about merging its media assets, like CNN, TBS and TNT, according to two sources familiar with the discussions.

Why it matters: A potential merger could allow AT&T and Discovery to better compete with entertainment giants like Disney and Netflix in the video streaming wars.

Tech's war for your wrist

Illustration: Sarah Grillo/Axios

Tech's biggest companies are ramping up competition for the real estate between your hand and your elbow.

The big picture: The next big hardware platform after the smartphone will likely involve devices for your eyes, your ears and your wrists.

25 mins ago - World

Tokyo Olympics to allow up to 10,000 fans at each event

Tokyo 2020 president Seiko Hashimoto (L) and IOC President Thomas Bach on Monday. Photo: Rodrigo Reyes Marin/POOL/AFP via Getty Images

Organizers of the Tokyo Olympics said Monday that venues can be filled up to 50% capacity when the Games kick off on July 23, with a maximum of 10,000 Japanese spectators at each event, AP reports.

Why it matters: Medical experts advising the Japanese government had recommended against allowing fans, citing the low vaccination rates in Japan and the potential for new variants to drive up infections.