AT&T shares close lower on Tuesday, telecoms giant to merge WarnerMedia with Discovery

AT&T Inc (T) announced earlier this week that it had reached an agreement to merge its content unit, WarnerMedia, with Discovery.

Under the terms of the deal, AT&T expects to receive an aggregate amount of $43 billion that combines cash, debt as well as WarnerMedia’s retention of certain debt.

As a result of the agreement, shareholders of AT&T are to receive stock representing 71% of the new entity and shareholders of Discovery – the remaining 29%.

AT&T shares closed lower for a second consecutive trading session in New York on Tuesday. It has also been the steepest single-session loss since June 11th 2020. The stock went down 5.80% ($1.82) to $29.55, after touching an intraday low at $28.91, or a price level not seen since March 4th ($28.65).

Shares of AT&T Inc have risen 2.75% so far in 2021 compared with a 9.90% gain for the benchmark index, S&P 500 (SPX).

In 2020, AT&T Inc’s stock went down 26.41%, thus, it again underperformed the S&P 500, which registered a 16.26% gain.

The Financial Times reported that the deal was anticipated to create a new business, apart from AT&T, with a value of as much as $150 billion including debt.

“This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms,” John Stankey, AT&T’s Chief Executive Officer, said in a statement, cited by CNBC.

“AT&T shareholders will retain their stake in our leading communications company that comes with an attractive dividend. 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,” Stankey also said.

Analyst stock price forecast and recommendation

According to CNN Money, at least 17 out of 26 surveyed investment analysts had rated AT&T Inc’s stock as “Hold”, while 3 – as “Buy”. The median price target on the stock stands at $32.00.