A megadeal between AT&T and Discovery is going down as one of the most lucrative mergers of its kind in recent history, but some of those who are more critical of these types of corporate practices may have some questions about how it’s being done.
Eddie Makuch at Gamespot reports AT&T’s WarnerMedia empire is combining with Discovery’s platform in order to offer what stakeholders call a “premium standalone global entertainment” service that they expect to generate something on the order of $52 billion in 2023.
Communications around the deal involve a bonanza of corporate-speak – executives cite “cost synergies” of $3 billion, and talk about both companies being dedicated to “direct to consumer (DTC) streaming service” customer models. evaluating the merger of entertainment and sports as leverage of “complementary content strengths” that stakeholders are hoping will push the new collaboration to the top of the pile.
“These assets are better and more valuable together,” said Discovery exec David Zaslav in a press statement. 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.”
One of the less savory points in an AT&T press release around the deal is the mention of a “reverse Morris trust transaction” as a vehicle for the merger. Experts commonly talk about this strategy as a way to sell assets without paying related taxes.
“The Reverse Morris Trust is a form of tax-avoidance employed by companies,” writes an expert at Corporate Finance Institute. “This tactic enables the company to sell off unwanted assets without incurring tax obligations on gains arising from the sale of these assets.”
So in an age where companies are increasingly under scrutiny for tax avoidance strategy, this merger may generate its own share of concern.
Keep an eye on this and other telecom events if you have related stock holdings.
