Will Apple, Disney or Netflix pursue an acquisition of NewCo?
Last year we wrote that AT&T should sell WarnerMedia. On Monday AT&T (tkr: T) led by John Stankey agreed to spin-off its WarnerMedia asset and to combine it with John Malone’s Discovery (tkr: DISCA) in a new, publicly-traded company led by Discovery CEO David Zaslav. AT&T shareholders will retain a 71% stake in NewCo (deal detail is below). NewCo will continue to have a scale problem when compared against Disney’s (tkr: DIS) direct-to-consumer (“DTC”) business and Netflix (tkr: NFLX), each of which boasts far more subscribers. While the deal is not expected to close until mid-2022, Apple (tkr: AAPL) may want to take this opportunity to step into the breach (Apple and Time Warner acquisition talks famously broke down years ago). The Cupertino giant has the balance sheet to easily execute such a deal but has not demonstrated an appetite for large acquisitions. No entity has executed more large content acquisitions than Disney. Adding Warner properties to the Disney portfolio would be a feather in Disney’s cap and give the Burbank studio a significant content IP lead over Netflix. Speaking of Netflix, the company is adamant about maintaining its corporate culture. It is therefore unclear if Netflix would risk its culture to pursue NewCo.