AT&T and Discovery combine media brands in $43bn deal

BY Fraser Tennant

In a deal that creates one of the largest global streaming players, US telecoms giant AT&T is to combine its WarnerMedia premium entertainment, sports and news assets with streaming service Discovery's nonfiction and international entertainment and sports businesses.  

Under the terms of the definitive agreement, which is structured as an all-stock, Reverse Morris Trust transaction, AT&T will receive $43bn in a combination of cash, debt securities and WarnerMedia’s retention of certain debt. AT&T’s shareholders will receive stock representing 71 percent of the new company, while Discovery shareholders will own 29 percent.  

Once the transaction is complete, the new company will compete globally in the fast-growing direct-to-consumer business, bringing compelling content to direct-to-consumer subscribers across its portfolio, including HBO Max and the recently launched discovery+.

In addition, the transaction will combine WarnerMedia’s storied content library of popular and valuable intellectual property with Discovery’s global footprint, trove of local-language content and deep regional expertise across more than 200 countries and territories.

“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,” said John Stankey, chief executive of AT&T. “It will support fantastic growth and create efficiencies which can be re-invested in producing great content to give consumers what they want.”

Moreover, Discovery president and chief executive David Zaslav will lead the proposed new company, with a management team and operational and creative leadership drawn from both companies.

“It is exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity,” said Mr Zaslav. “We will build a new chapter together with the creative and talented WarnerMedia team and these incredible assets built on a nearly 100-year legacy of the most wonderful storytelling in the world.”

The boards of directors of both AT&T and Discovery have approved the transaction, which is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals.

Mr Stankey concluded: “This is an opportunity to unlock value and be one of the best capitalised broadband companies – a global media leader that can build one of the top streaming platforms in the world.”

News: AT&T set to end media voyage with $43 bln Discovery deal

Crown turns down Blackstone bid

BY Richard Summerfield

Private equity giant Blackstone has had a $6.5bn offer for troubled Australian casino operator Crown Resorts rejected.

“The board has unanimously concluded that the revised (Blackstone) proposal undervalues Crown, and is not in the best interests of Crown’s shareholders,” Crown said in a statement.

The company noted that Blackstone’s offer of A$12.35 per share, or A$8.4bn, did not consider the full value of its assets, a potential jump in earnings once the COVID-19 pandemic eases and plans to pay down a significant amount of debt. The Blackstone offer also created some uncertainty about the timing of any deal, Crown noted.

Star Entertainment Group, which owns and operates casinos and hotels across Australia, most notably in New South Wales and Queensland, has also made an all-stock offer for Crown. In a separate statement, Crown said it had not yet formed a view on the merits of the Star merger proposal but had requested certain information to better understand preliminary matters. The Star proposal is expected to attract antitrust scrutiny, which could create difficulties going forward.

Crown has endured a considerable adversity of late. In addition to a slump in profits due to the coronavirus pandemic, the company has also faced increased regulatory scrutiny, lost its licence to operate a flagship new casino on Sydney’s waterfront amid allegations of money laundering and links to organised crime, and also faces inquiries in the other two Australian states where it is licensed to operate. Furthermore, the company is facing two civil lawsuits accusing it of failing to disclose risks which led to share price declines.

Blackstone initially offered $11.85 a share for Crown, representing a 19 percent premium to the volume-weighted average price of Crown shares since the release of its first half results for the financial year 2021. Blackstone, which owns around 10 percent of Crown shares, increased its previous offer in April. The modified deal included conditions designed to safeguard Blackstone against an adverse recommendation like the cancellation or suspension of Crown’s Western Australia or Victorian licences by either inquiry before the deal is approved by courts.

Rival private equity firm Oaktree Capital Group has also expressed an interest in Crown, offering a “structured instrument” to help Crown buy back the 37 percent stake held in the company by founder James Packer.

News: Crown Resorts rejects Blackstone’s proposal and keeps Star under review

Firms unprepared for cyber attacks, says CISO report

BY Richard Summerfield

Two-thirds of chief information security officers (CISOs) feel their companies are unprepared for a cyber attack, according to a new report from Proofpoint Inc.

The company’s inaugural ‘2021 Voice of the CISO Report’ examines global third-party survey responses from more than 1400 CISOs at mid to large size organisations across different industries. Throughout the course of Q1 2021, 100 CISOs were interviewed in each market across 14 countries: the US, Canada, the UK, France, Germany, Italy, Spain, Sweden, the Netherlands, UAE, Saudi Arabia, Australia, Japan and Singapore.

According to the report, 66 percent of CISOs feel their organisation is unprepared to handle a cyber attack and 58 percent consider human error to be their biggest cyber vulnerability. These responses are particularly noteworthy given the mass migration of employees to remote working over an unprecedented 12 months. Many CISOs have struggled to create a sense of urgency and priority among employees. Security training and awareness remain a challenge. Accordingly, 66 percent percent of CISOs do not believe their organisations are prepared to cope with an attack.

“Last year, cybersecurity teams around the world were challenged to enhance their security posture in this new and changing landscape, literally overnight,” said Lucia Milică, global resident CISO at Proofpoint. “This required a balancing act between supporting remote work and avoiding business interruption, while securing those environments.”

She continued: “With the future of work becoming increasingly flexible, this challenge now extends into next year and beyond. In addition to securing many more points of attack and educating users on long-term remote and hybrid work, CISOs must instill confidence among customers, internal stakeholders, and the market that such setups are workable indefinitely.”

However, despite many of the concerns voiced by CISOs regarding preparedness, many CISOs do feel adequately prioritised from a budget standpoint. The majority of global CISOs expect budgets to increase by at least 11 percent in the next two years. Sixty-five percent believe their companies will be better able to resist and recover from cyber attacks by 2022/23.

Report: 2021 Voice of the CISO report

Driverless truck start-up Plus goes public in $3bn SPAC deal

BY Fraser Tennant

In a $3.3bn deal that will make it a publicly traded company, self-driving truck technology start-up Plus is to merge with special purpose acquisition company (SPAC) Hennessy Capital Investment Corp. V (HCIC V).

Under the terms of the definitive agreement, Plus’s existing shareholders will convert 100 percent of their ownership stakes into the combined company and are expected to own approximately 80 percent of the post-combination company at close.

Furthermore, the merger is expected to deliver up to approximately $500m in gross proceeds at closing, including approximately $345m of cash held in HCIC V’s trust account from its initial public offering (IPO) in January 2021.

“This transaction enables us to continue growing our business globally, so that fleets and drivers can benefit from our revolutionary technology and usher in a new generation of innovation,” said David Liu, chief executive and co-founder of Plus. “At the same time, the transaction introduces a partner that shares our focus on sustainable technology and infrastructure, is aligned on our growth and value creation objectives, and recognises the challenges trucking companies face today.”

To meet these challenges, Plus plans to roll out its Supervised Level 4 PlusDrive solution in 2021 and accelerate the development of its Level 4 fully autonomous system by the end of 2024.

“We are excited to partner with Plus on their mission to make long-haul trucking safer, cheaper and better for the environment,” said Daniel J. Hennessy, chairman and chief executive of HCIC V. “We look forward to collaborating with experts in automotive safety, self-driving technology, artificial intelligence, robotics, cyber security and product development, as Plus transforms the global freight market with a safe self-driving trucking system.”

The merger has been unanimously approved by the boards of directors of both Plus and HCIC V and is expected to close in the third quarter of 2021, subject to the satisfaction of the necessary regulatory approvals and customary closing conditions, including approval by HCIC V’s shareholders.

Mr Liu concluded: ”We look forward to working closely with the HCIC V team as we move to commercial deployment and deliver value for drivers, customers and shareholders.”

News: Self-driving truck startup Plus to go public through $3.3 bln SPAC deal

Over three quarters of FIs unprepared for LIBOR transition, reveals new report

BY Fraser Tennant

Over three quarters (77 percent) of financial institutions (FIs) do not have a comprehensive plan in place for transitioning from the London Interbank Offered Rate (LIBOR), according to new report by Duff & Phelps.

A key part of the financial services infrastructure, LIBOR is a globally recognised base rate for pricing loans, debt and derivatives and has been called the “world’s most important number”.

According to the report, based on a survey of private equity firms, professional service providers, hedge funds, banks and others, while 54 percent had identified LIBOR exposures, they had not yet taken necessary action to resolve their liability.

Furthermore, 58 percent of these firms had not catalogued transition provision and 42 percent said they were unsure of what to do next. Almost a quarter (23 percent) of the firms surveyed have not begun any formal processes to identify exposure, with 14 percent suggesting they would not be ready until Q1 2022 at the earliest.

“The LIBOR transition is one of the greatest regulatory-driven changes ever, and inevitably it requires complex planning, thought and analysis,” said Jennifer Press, a managing director at Duff & Phelps. “It is therefore quite surprising to see that just nine months away from the hard deadline, the majority of financial institutions who were polled do not have a comprehensive plan in place.”

A failure to adequately prepare for the LIBOR transition – which is due to take place on 31 December 2021 – could lead to significant risks for firms as contracts transition to alternative reference rates.

However, a third of respondents revealed a belief that they are on track, despite limited progress across the majority of the industry. However, the report notes that firms may be underestimating the extent and complexity of the work required for a successful transition.

“The results indicate that although the majority of firms have identified their LIBOR exposures, many have yet to formally catalogue the transition provisions,” said Marcus Morton, a managing director at Duff & Phelps. “There is a real fear that many are pinning their hopes on fallback provisions written within existing contracts. The reality is that fallback language may not suit each and every party, and in some cases, contracts will fail if such provisions are inadequate.”

Rich Vestuto, a managing director at Duff & Phelps, added: “Technologies such as natural language processing and artificial intelligence could go a long way to help firms fully understand their exposure, but they must start the process now.”

Report: LIBOR transition survey