biggest shareholders are getting a premium price for their stakes in the media company under the deal that combines it with
media business, securities filings show.
Advance Publications Inc. and Newhouse Broadcasting Corp., which already control around a quarter of two classes of Discovery’s shares, are set to receive what amounts to a 14% premium over their ownership stake in exchange for agreeing to vote for the deal and convert their preferred shares to common shares.
The companies have yet to file formal registration statements detailing the transaction. But available details show the degree to which insiders are poised to benefit from a deal that shook the media and telecommunications landscapes on Monday, when AT&T said it would spin off HBO, CNN and the rest of its WarnerMedia division and combine it with Discovery.
Some of the preferred shares held by Advance and Newhouse give the investors “consent rights” over major decisions, including issuing new stock, mergers and other business combinations, Discovery’s most recent annual report notes.
Under the deal proposed by AT&T and Discovery, the resulting company will emerge with a single share class, eliminating the special privileges that the Advance/Newhouse investors have, securities filings say.
In return for Advance’s and Newhouse’s consent for the transaction, Discovery has agreed to increase the number of common shares that the investors will receive by converting preferred shares, yielding the 14% premium, the securities filings say. The companies’ stake in Discovery was valued at about $5.4 billion as of Monday’s close, according to a calculation by InsiderScore, which analyzes stock transactions by corporate insiders.
Discovery also agreed to name to the board of the combined company Advance/Newhouse Partnership Chief Executive
who is also a senior executive at Advance, and
Advance’s co-president, the filings show. Advance Publications is controlled by the Newhouse family and owns the Condé Nast magazine empire and metropolitan newspapers, among other media properties.
As part of the arrangement, Advance and Newhouse have agreed to vote in favor of the transaction even if Discovery’s board changes its mind and recommends that shareholders oppose it, AT&T says in a securities filing.
—a media magnate who sits on Discovery’s board and controls about a quarter of the voting power of Discovery’s shares—has made a similar pledge, but said in a statement that he supported the deal without seeking a premium. Together, Mr. Malone, Advance and Newhouse control about 44% of Discovery’s voting shares, AT&T notes in a filing.
In a statement, Advance called the transaction good for all shareholders and said that the company is forfeiting significant rights by voting to abandon the old share-class structure and that an independent committee of Discovery’s board concluded its premium was fair.
AT&T and Discovery have said they expect the deal to close in mid-2022.
Write to Theo Francis at [email protected]
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