AT&T Inc. / WBD
AT&T Inc. / WBD
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Information for Stockholders Receiving Shares of Warner Bros. Discovery as a Result of the WarnerMedia Separation

At the close of business on April 8, 2022, AT&T completed the previously announced transaction to combine AT&T’s WarnerMedia business with Discovery by distributing, on a pro rata basis, all of the outstanding common stock of SpinCo to AT&T common stockholders of record as of April 5, 2022 (the “Distribution”). Pursuant to the Distribution, each holder of AT&T common stock received one share of SpinCo common stock for every share of AT&T common stock held as of the record date.

Immediately following the Distribution, a wholly owned subsidiary of WBD merged with and into SpinCo, with SpinCo surviving as a wholly owned subsidiary of WBD (the “Merger”). In the Merger, each share of SpinCo common stock immediately prior to the Merger was automatically converted into the right to receive 0.241917 shares of WBD common stock. For more information on this please click here.

This information is for illustrative purposes and not intended as tax advice. You should consult your tax advisor as to the specific tax consequences to you of the transaction under U.S. Federal, state, local and foreign tax laws. For more information on tax consequences of the transaction, refer to the Form 8-K and Final Information Statement filed by Magallanes, Inc. with the U.S. Securities and Exchange Commission on March 28, 2022.

8-K filing related to the WarnerMedia/Discovery transaction closing

Report of Organizational Actions Affecting Bases of Securities (Form 8937)

Attachment to Form 8937

AT&T Inc. has received confirmation from the Canadian Revenue Agency that the distribution of shares as part of the 2022 WarnerMedia/Discovery transaction meets the requirements, under Section 86.1 of the federal Canadian Income Tax Act, to pass on a rollover basis (e.g., Canadian taxation of any gain is deferred) to shareholders, provided the shareholder complies with certain filing requirements.

Effect on Cost Basis

AT&T stockholders must allocate their aggregate tax basis in their shares of AT&T common stock held immediately prior to the Distribution among:

the shares of SpinCo common stock distributed in the Distribution, and

the shares of AT&T common stock in respect of which such shares of SpinCo common stock were received in proportion to their respective fair market values immediately after the Distribution.

AT&T stockholders will then have an aggregate tax basis in the shares of WBD common stock received in the Merger, including any fractional share deemed issued and sold for cash as described below, which is equal to the aggregate tax basis allocated to the shares of SpinCo common stock described above.

Each AT&T stockholder’s aggregate tax basis in the shares of SpinCo common stock will be allocated among each share of WBD common stock based on the exchange ratio (1 : 0.241917 SpinCo to WBD). For example:

Using the following average of opening and closing trading prices on April 11, 2022 and the merger exchange ratio (1 : 0.241917), an allocation percentage of 23.48% can be derived:

Average trading prices (April 11, 2022) of common stock:

WBD $24.43; AT&T $19.26

23.48% = $5.91 proportionate value of WBD common stock ($24.43 x 0.241917) / $25.17 ($19.26 AT&T common stock + $5.91)

Fractional Shares: A SpinCo stockholder who receives cash in lieu of a fractional share of WBD common stock will be treated as having received the fractional share pursuant to the Merger and then as having sold that fractional share for cash. As a result, such stockholder will recognize gain or loss equal to the difference between the amount of the cash received for such fractional share and the tax basis allocated to such fractional share.