AT&T owes $1.8 billion in severance if it drops Discovery deal

AT&T owes a $ 1.8 billion settlement if the Discovery deal is terminated

AT&T will pay Discovery a termination fee of $ 1.77 billion if the company goes out of business to sell its WarnerMedia segment, according to a merger plan filed Thursday. If Discovery goes out of business, it will owe AT&T a termination fee of $ 720 million. The terms were announced on Thursday. If regulators cancel the deal, neither party will have to pay a settlement fee. The deal is expected to close in mid-2022.

The Merger Plan also provides that Discovery will size its Board of Directors to 13, consisting of five Board-appointed Directors and Discovery’s CEO, David Zaslav. In addition, seven AT&T directors will be appointed. Telecommunications also selects the chairman of the discovery board.

Separation fees are a standard part of media mergers. For example, Disney agreed to pay $ 2.5 billion if its 2019 acquisition of Fox was blocked by regulators. In 2016, Time Warner agreed to pay AT&T a $ 1.6 billion resolution fee should it pull out of this merger. AT&T would have paid Time Warner $ 500 million.

The pact with WarnerMedia stunned Hollywood when it was unveiled last weekend. It has the potential to create a new media powerhouse that will bring the companies behind Warner Bros., HBO, TNT, HGTV, and Animal Planet together.

As part of his new employment contract, Zaslav’s base salary remains $ 3 million per year and he will receive a target bonus of $ 22 million. If the deal is closed, Zaslav will receive his full bonus for the calendar year following the year the transaction is closed. As previously reported, Zaslav received options worth $ 190 million.

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