Discovery shareholders reach $125 million settlement in lawsuit over AT&T merger in 2022

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

Several pension funds filed suit in the Delaware Court of Chancery after the $43 billion merger closed, alleging that the deal unfairly benefited Discovery’s top investors at the expense of ordinary investors. The court released a document Friday detailing the deal, which was reached in May on the recommendation of a mediator.

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

Among the defendants in the lawsuit are a group of former Discovery backers, including the Advance/Newhouse partnership and Robert Miron, his son, Steven Miron, and Susan Swain. All are former Discovery board members. Robert Miron served as chairman of the board. Swain is CEO of C-SPAN, but has announced she will step down from that position later this year.

The Advance/Newhouse partnership is a private company owned by the Newhouse family, which owns approximately 8% of WBD shares through its prior ownership of Discovery shares.

The complaint alleges that the merger was “not entirely fair,” in the words of the filing Friday, because it generated payments of more than $1 billion to some insiders and left common shareholders in the dark. 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 merger structure, AT&T owns 71% of WBD and Discovery the remaining 29%, but Discovery’s former management team, led by CEO David Zaslav, controlled WBD’s operations.

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

Miron is the CEO of Advance/Newhouse Partnership, a private company owned by the Newhouse family. The family owns about 8% of WBD through its prior stake in Discovery. Miron is also a director of Charter, as is another Newhouse family member, Michael Newhouse.

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

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