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Comcast Seen In No Rush To Counter WarnerMedia, Discovery Merger

Comcast (CMCSA) will not rush into an acquisition to counter the merger of AT&T‘s (T) WarnerMedia and Discovery (DISCA), an analyst said. But Comcast stock, which owns NBCUniversal, could be interested in acquiring Viacom (VIAC), according to reports.




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Still, Bank of America analyst Jessica Reif Ehrlich doesn’t expect a deal near-term.

“We do not view Comcast as pressured to make an imminent move, particularly in light of projected stellar NBCU results in 2022,” Ehrlich said in a report to clients.

“In our view, CMCSA/NBCU already benefits from significant content/programming scale and highly relevant brands providing it with the heft to be able to compete in its current form. However, we believe CMCSA may ultimately look to expand its content library/production capacity, potentially through M&A, but only at an attractive value.”

Comcast Stock Near An Entry Point, Discovery Stock Dips

Meanwhile, Comcast stock rose 1% to 55.67 in midday trading on the stock market today. Shares trade below an entry point of 58.69 with a Relative Strength Rating of 56 out of a best possible 99, according to IBD Stock Checkup.

Discovery stock dipped 0.4% to 31.33 on Monday. Controlled by cable TV industry pioneer John Malone, Discovery owns a Relative Strength Rating of 39.

MoffettNathanson on Monday downgraded Discovery to neutral on views that the new media giant will struggle to transition some cable TV networks to internet streaming business models.

“We expect the higher debt load and equity issuance to reduce upside for Discovery shareholders in the near-term as linear cable network secular challenges offset the benefits of the direct-to-consumer (streaming) pivot,” analyst Michael Nathanson said in his note to clients.

AT&T will spin off its WarnerMedia business, which includes the HBO Max streaming platform, and combine it with Discovery’s domestic and international assets. The deal is expected to close in late 2021.

AT&T To Cut Dividend

AT&T’s shareholders would receive stock representing 71% of the combined company. Discovery shareholders would own 29%. AT&T will appoint seven board members and Discovery will appoint six.

The combined company will pay AT&T a one-time special dividend of $43 billion. AT&T plans to use the funds to reduce debt.

However, AT&T will cut its dividend owing to the loss of WarnerMedia’s free cash flow.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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