Discovery's 1,000 Knoxville employees brace for proposed merger with AT&T's WarnerMedia

Some of Discovery Inc.'s estimated 1,035 Knoxville-based employees are bracing for change — again.

The company announced plans to merge with AT&T's WarnerMedia and form a new standalone global entertainment company.

It's a $43 billion deal that, if approved, would allow two broadcast giants to partner in a market increasingly dominated by streaming services like Netflix and Amazon Prime Video.

The potential merger represents another period of uncertainty for the employees based out of Discovery's Knoxville hub, many of whom survived its takeover of Scripps Networks Interactive in March 2018.

The company self-reported 1,035 employees in the Knoxville area to the 2020 Book of Lists.

It will be some time before we know how the merger could impact Discovery's Knoxville employees or its facilities at 9721 Sherrill Blvd. in Hardin Valley. The proposed new company doesn't even have a name yet, and the deal would not close until mid-2022.

The new company could have a projected 2023 revenue of about $52 billion and the merger would result in $3 billion in "cost synergies" annually. Likely some of that $3 billion in cost savings would be related to personnel.

Discovery has an estimated 9,800 employees, according to Bloomberg.

Discovery, WarnerMedia merger would close in 2022

The deal is subject to regulatory approvals and Discovery shareholder vote. No vote is required by AT&T shareholders. The boards of directors for AT&T and Discovery have approved the transaction.

Discovery President and CEO David Zaslav would lead the new company, according to a press release, and six of the 13 seats on the new company's board of directors would be appointed by Discovery.

Investor documents tout it as a coming together of two companies with shared values, iconic brands and complementary assets that "will offer the most differentiated content portfolio in the world."

The new company would have a deep well of content and channels, including Discovery's cable networks like Food Network and HGTV, and WarnerMedia's CNN, HBO, TNT and TBS.

"During my many conversations with (AT&T CEO John Stankey), we always come back to the same simple and powerful strategic principle: These assets are better and more valuable together," Zaslav said in a press release. "It is super exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity." 

How the deal would work

In an all-stock deal, AT&T would spin out WarnerMedia, which would merge into Discovery.

AT&T would receive $43 billion in a combination of cash, debt securities and WarnerMedia’s retention of certain debt.

Shareholders of AT&T would receive stock representing 71% of the new company and Discovery shareholders would own 29%.

The potential deal gives AT&T a chance to refocus its attention on growth and expansion in 5G Wireless and fiber.

"AT&T shareholders will retain their stake in our leading communications company that comes with an attractive dividend," Stankey said in a press release. "Plus, they will get a stake in the new company, a global media leader that can build one of the top streaming platforms in the world."

Both entities have already entered the streaming industry: AT&T with HBO Max and Discovery with Discovery Plus, which launched this year. This partnership is intended to speed up a shared vision of leading the growing and competitive industry.

The companies touted the symbiotic combination of WarnerMedia's studios and scripted shows with Discovery's global expertise in unscripted television.

"The new company will be able to invest in more original content for its streaming services, enhance the programming options across its global linear pay TV and broadcast channels, and offer more innovative video experiences and consumer choices," according to a press release.

Brands under the new company would also include OWN, TLC, Magnolia Network, HLN, Cartoon Network, Animal Planet, Cinemax, Adult Swim and others.

Another Discovery merger for Knoxville

Discovery Communications merged with the Knoxville-based Scripps Networks Interactive in March 2018 and announced it would locate some of its operations in  Knoxville as part of the $14.6 billion cash-and-stock deal. It rebranded to Discovery Inc. and acquired $2.7 billion of Scripps' debt.

Proponents said the 2018 merger would strengthen the media brands' standings in an increasingly digital media landscape and would allow the companies to save $350 million over two years. The company's world headquarters moved from Silver Spring, Maryland, to New York City.

The company laid off an unspecified number of Knoxville employees in summer 2018, but said Knoxville's employee headcount would remain neutral as it hired for other positions. Scripps employed about 1,000 in the Knoxville area before it was acquired.

The company laid off an unspecified number of Knoxville employees in July 2019 after it moved pre-recorded transmissions functions to Virginia, according to previous Knox News reporting. The affected employees were notified in January 2019.

"Scripps is one of the best run media companies in the world with terrific assets, strong brands and popular talent and formats," Zaslav said as part of the Aug. 2017 announcement of the merger. “We believe that by coming together with Scripps, we will create a stronger, more flexible and more dynamic media company with a global content engine that can be fully optimized and monetized across our combined networks, products and services in every country around the world.”

Scripps President and CEO Ken Lowe stepped down after the merger and took a seat on Discovery's board. He is still a member.

Source: Knoxville News Sentinel, Brenna McDermott

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Published May 18, 2021