AT&T Inc. and Discovery Inc. reached a deal to combine their media assets into a new, publicly traded company, unwinding the telecom company’s big bet on entertainment after less than three years. The new business, which isn’t yet named, will be led by current Discovery Chief Executive David Zaslav. The companies said Jason Kilar will retain his title as CEO of AT&T’s WarnerMedia division but declined to say whether he would remain with the newly combined company after it secures regulatory approval. Shares of AT&T rose Monday, while Discovery’s stock slipped after an early rise. Discovery’s market value traded above $17 billion. AT&T, which draws most of its revenue from the telecommunications business, had a roughly $240 billion market value. The new media business will hold a little more than $55 billion of debt, Mr. Zaslav said. Furthermore he pointed out the combined entities spend $20 billion on content, a level that tops Netflix Inc.’s recent programming budget. WarnerMedia owns cable channels such as HBO, CNN, TNT and TBS as well as the Warner Bros. television and film studio. Discovery has a portfolio that includes its namesake network and HGTV.
Both companies also offer streaming video portals that compete with larger on-demand services like Netflix and Walt Disney Co.’s Disney+. The two CEOs declined to detail their long-term plans for HBO Max and Discovery+, which could remain separate or be combined into an even larger online video library. Under the deal, AT&T shareholders will hold a 71% stake in the new entity, while Discovery shareholders own a 29% stake. In exchange, AT&T said it will receive $43 billion of cash, debt securities and WarnerMedia’s retention of certain debt. AT&T also signaled it will cut its dividend to reflect its smaller size once the media business is carved out into a separate company. The deal unveiled Monday will complete AT&T’s retreat from the media business. The company earlier this year reached an agreement with private-equity firm TPG to shed a 30% stake in its DirecTV business for $1.8 billion. The companies said they expect to close the transaction in mid-2022. AT&T gave up early gains and closed down 87 cents, or 2.7%, to $31.37. Discovery stock was volatile. Class A shares of the television company slumped $1.80, or 5%, to $33.85 after initially jumping more than 11% in morning trading.

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The Swiss stock market posted slight gains at the beginning of the week. However, the trading environment was characterized by volatility. The SMI gained 0.1 percent to 11,135 points. Among the 20 SMI stocks, there were 12 price gainers and 8 price losers. 29.09 (previously: 33.94) million shares were traded. Investors' concerns about rising inflation continue to be present, despite the appeasing words of representatives of the U.S. Federal Reserve. Fears of tighter monetary policy in the U.S. in response to rising prices had recently weighed on sentiment on stock exchanges worldwide. A clear trend could not be identified in the SMI on Monday. Swatch was the day's winner with a plus of 1.3 percent. Meanwhile, the shares of competitor Richemont fell by 0.2 percent. Among the index heavyweights, Nestle recorded gains of 0.7 percent. Among pharmaceutical groups, Roche shares advanced 0.4 percent, while Novartis posted discounts of 0.4 percent. Novartis suffered a defeat in the U.S. Supreme Court and will not bring a generic version of Amgen's blockbuster Enbrel to the U.S. market anytime soon. Among financials, Credit Suisse (+0.8%) and UBS (+0.6%) were in demand. Meanwhile, the significant losses in the shares of asset manager Partners Group (-1.7%) were only optical, as the stock traded ex-dividend (27.50 francs).

European stocks edged lower on Monday, as investors weighed signs that COVID-19 infections are continuing to spread in Asia, even as fears about inflation appear to have subsided. The Stoxx Europe 600 index lost 0.1% to 442.3 points. In Paris, the CAC 40 and the SBF 120 each gave up 0.3%. In Frankfurt, the DAX 30 was down 0.1%, while the FTSE 100 in London gave up 0.2%. Ryanair, the Irish discount airline, edged up 2%. It recorded a EUR1 billion ($1.2 billion) annual loss in the year to March 30 and said bookings have jumped significantly from a very low base since the first week of April. "Ryanair, like its ultra-low-cost peer Wizz Air, weathered the crisis far better than its legacy counterparts. It also stands ready to hoover up the pent-up demand for foreign holidays we're about to see as rules on international travel finally ease," said Jack Winchester, an analyst at Third Bridge. Diploma, a maker of specialty instruments, climbed 7%, after hiking its profit forecast and reporting a 33% rise in adjusted operating profit in the first half. Sanofi SA (+1,1%) and GlaxoSmithKline PLC (-0,3%)said their Covid-19 vaccine candidate showed positive interim trial results and is expected to move into large-scale human trials soon, putting the long-delayed shot on track for potential regulatory approval later this year. The vaccine can be stored using normal refrigeration, an advantage compared with ultracold temperature requirements of some shots. GSK is also working with German biotechnology company CureVac NV to help manufacture a vaccine that uses a different technology called messenger RNA.

U.S. stocks fell Monday, weighed down by declines among technology shares, as concerns about inflation continued to unsettle investors. The Dow Jones Industrial Average fell 54.34 points, or 0.2%, to close at 34327.79. The S&P 500 dropped 10.56 points, or 0.3%, to 4163.29. The tech-heavy Nasdaq Composite declined 50.93 points, or 0.4%, to 13379.05. Bitcoin tumbled after a tweet by Tesla Chief Executive Elon Musk prompted speculation that the electric-car maker had sold, or would sell, its holdings of the cryptocurrency. Mr. Musk later tweeted that Tesla hadn’t sold any bitcoin. Shares of Tesla fell $12.91, or 2.2%, to $576.83. Data science and analytics company Clarivate (+0.1%) announced Monday that it has signed an agreement to buy technology group ProQuest from investment firm Cambridge Information Group for $5.3 billion including debt refinancing. Crown Resorts rejected a takeover bid from U.S. private equity firm Blackstone (-0.2%), saying the proposal undervalued Australia's leading casino operator and presented too many regulatory uncertainties. Apple (-0.9%) CEO Tim Cook is expected to testify this week in the tech giant's lawsuit against video game publisher Epic Games, which accuses it of anti-competitive practices. Microsoft's (-1.2%) board of directors has asked for Bill Gates to step down in 2020 because of an investigation into a relationship deemed "inappropriate" that he allegedly had with a female employee of the group, people close to the matter told The Wall Street Journal.

In Asia, most major benchmarks posted solid gains on Tuesday, despite some pessimism about the conronavirus pandemic. And investors largely ignored the latest growth data out of Japan. The nation's economy shrank 5.1% on an annualized basis in the January-March quarter amid a resurgence of Covid-19 infections, but it is expected to return to growth as soon as the current quarter with help from manufacturing exports. In Tokyo, the Nikkei 225 index more than made up for the roughly 1 percent drop from the previous day, rising 2.2 percent to 28,447 points. Chinese stocks rose after data showed the nation’s industrial output jumped 9.8% year over year in April, beating forecasts. The Shanghai Composite Index advanced 0.8%. In South Korea (+1.23%), hopes for more available Covid-19 vaccine provide confidence.

In the bond market, the yield on 10-year Treasury notes settled at 1.639%, unchanged from Friday.

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