Why it matters: With the deal, AT&T is essentially unwinding its mega merger with Time Warner, conceding that it wasn't able to go blow for blow with titans like Netflix and Disney in the streaming video wars. Earlier this year, Verizon did the same by selling off AOL and Yahoo for a fraction of what it initially paid.

The streaming video race is heating up as AT&T has announced plans to spin off its WarnerMedia unit and combine it with Discovery to create a standalone global entertainment company.

Discovery CEO David Zaslav will lead the new company. AT&T will initially appoint seven of the new company's board members, with Discovery being responsible for the remaining six.

The deal, which is being structured as an all-stock, Reverse Morris Trust transaction, will see AT&T's shareholders receive 71 percent of the new company and Discovery shareholders getting the remaining 29 percent. Discovery's current multiple classes of shares will be consolidated into a single class, with one vote per share. AT&T will receive $43 billion in a combination of cash, debt securities and WarnerMedia's retention of certain debt.

Combined, the new company will have a massive content library featuring more than 100 popular brands, including HBO, Warner Bros., Discovery, Cartoon Network and CNN, just to name a few.

Board members of AT&T and Discovery have approved the deal. Pending customary regulatory approval and closing conditions, the transaction is expected to close in mid-2022.

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