Discovery Shareholders Win $125M Settlement Of Lawsuit Alleging AT&T Merger “Wasn’t Entirely Fair” To Most Investors

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Warner Bros. Discovery, which was formed in 2022 from the merger of AT&T’s WarnerMedia and Discovery Communications, has agreed to pay $125 million to settle a shareholder lawsuit over the deal.

A handful of pension funds filed suit in Delaware Chancery Court after the $43 billion merger closed, alleging that the transaction unfairly benefited top-tier investors at Discovery at the expense of everyday investors. On Friday, the court released a document detailing the settlement, which had been agreed to in May at the recommendation of a mediator.

Once Delaware Chancery Judge Travis Laster approves the agreement, holders of Discovery stock prior to the merger closing date in April 2022 will be eligible to receive funds from the settlement.

Defendants in the suit included a set of former Discovery backers, including the Advance/Newhouse Partnership and Robert Miron; his son, Steven Miron; and Susan Swain. All are former members of Discovery’s board of directors. Robert Miron served as board chairman. Swain is CEO of C-SPAN but has announced she will step down from that role later this year.

The Advance/Newhouse Partnership is privately held by the Newhouse family, which owns about 8% of WBD stock as a result of its prior ownership of Discovery shares.

The lawsuit alleged that the merger was “not entirely fair,” in the words of Friday’s filing, because it generated payouts of more than $1 billion to select insiders and left common shareholders in the cold. Of the total settlement amount, $100 million will be provided by the Advance/Newhouse Partnership, with Robert and Steven Miron each adding $12.5 million.

Under the structure of the merger, AT&T holds 71% of WBD and Discovery the remaining 29%, but the former management team of Discovery, led by CEO David Zaslav, has controlled the operations of WBD.

Last April, Warner Bros. Discovery revealed that Steven Miron and Steven Newhouse had resigned from its board. They left after the U.S. Department of Justice informed them it was investigating whether their board tenures violated Section 8 of the Clayton Antitrust Act. The section prohibits directors and officers from serving simultaneously on the boards of competitors, subject to limited exceptions. Miron is also a director of Charter Communications.

Miron is CEO of Advance/Newhouse Partnership, which is privately held by the Newhouse family. The family owns about 8% of WBD stock through its previous holding in Discovery. Miron is also a director of Charter, as is another Newhouse family member, Michael Newhouse.

The plaintiffs included the Bricklayers Pension Fund of Western Pennsylvania, City Pension Fund for Firefighters & Police Pension Officers in the City of Pembroke Pines, Key West Police and Firefighters’ Pension Fund, and Steve Silverman.

A WBD rep declined to comment on the settlement when contacted by Deadline.