AT&T's board OK'd spinning off WarnerMedia as part of a $43 billion transaction between Discovery and Warner (see 2105160003), AT&T said Tuesday. It said the deal is expected to close in Q2, and after close, Warner Bros. Discovery stock will likely be listed by Nasdaq. AT&T CEO John Stankey said the spinoff is "simple, efficient and results in AT&T shareholders owning shares of both companies, each of which will have the ability to drive better returns in a manner consistent with their respective market opportunities." AT&T stock closed at $24.42, down 4.2%, as the company also announced it's cutting the annual dividend by 47%, to $1.11, after the spinoff.

AT&T got a “favorable" private letter ruling Tuesday from the IRS that AT&T's simultaneous spinoff of WarnerMedia and joining it with Discovery will be tax-free for AT&T shareholders for U.S. federal tax purposes, said an 8-K filing Wednesday at the SEC. AT&T previously submitted a request to the IRS for the ruling, as “contemplated” by the May 17 merger agreement (see 2105170034), it said.

Discovery's pending buy of AT&T's WarnerMedia got European Commission antitrust approval without conditions, Discovery said Wednesday. That EC OK "is a key milestone toward completing our proposed transaction with AT&T," said CEO David Zaslav. Discovery said it anticipates the deal closing in mid 2022, pending other regulatory approvals.

Rep. Joaquin Castro of Texas, Sen. Elizabeth Warren of Massachusetts, House Antitrust Subcommittee Chairman David Cicilline of Rhode Island and Congressional Progressive Caucus Chair Rep. Pramila Jayapal of Washington led a Monday letter with 29 other congressional Democrats urging DOJ to investigate AT&T’s planned spinoff of WarnerMedia to Discovery for potential antitrust law violations. The letter to Attorney General Merrick Garland and DOJ Antitrust Division head Jonathan Kanter is the first major federal resistance to the deal, which is to close in mid-2022 (see 2110210052). “The merger threatens to enhance the market power of the combined firm and substantially lessen competition in the media and entertainment industry,” the Democrats wrote Garland and Kanter, saying DOJ must “conduct a thorough review of this transaction to ensure that it does not harm American consumers and workers by illegally harming competition.” The lawmakers want the department “to thoroughly" examine if WarnerMedia-Discovery "will reduce the amount of diverse and inclusive media and entertainment content.” A “more consolidated, less competitive marketplace may only reduce the competitive pressure on media companies to provide consumers with more diverse and inclusive programming,” they said. Other signers include Senate Communications Subcommittee Chairman Ben Ray Lujan of New Mexico and House Consumer Protection Subcommittee Chairwoman Jan Schakowsky of Illinois. AT&T CEO John Stankey said at a UBS investor conference the letter's concerns were "unfounded." Letters from members of Congress aren't unusual, and happen in most AT&T transactions due to the company's size and scope, he said. "There is always going to be those who have a different lens they want to put on something." AT&T has had "good and constructive discussions" with regulators, and the transaction so far is going to plan, he said. "I have seen nothing that has gone on in that process that is out of pattern or out of skew." The company should be able to publicly demonstrate progress in the regulatory review in Q1, he said. AT&T and Discovery didn’t comment further.

AT&T and Discovery combining WarnerMedia’s entertainment, sports and news assets with Discovery's nonfiction, international entertainment and sports businesses is further validation the world is moving to streaming, said Roku Chief Financial Officer Steve Louden at a Monday investor conference. “Anything that provides further evidence that the other stakeholders in the ecosystem are doubling down on the streaming ecosystem, that’s good for us as the leading streaming platform.” Louden said Roku will continue to engage with the media companies and will be “one of the best distribution partners for the combined entity.”

AT&T's simultaneous spinoff of WarnerMedia and joining it with Discovery is expected by some to skate through regulatory OK. AT&T said the deal announced Monday will result in a huge increase in customers it serves by fiber and its 5G C-band network.