Combined images of AT&T CEO John Stankey (L) and WarnerMedia CEO Jason Kilar.

Reuters

AT&T is in advanced talks to merge WarnerMedia with Discovery to strengthen the combined company against rival media giants Netflix and Disney, according to people familiar with the matter.

A deal could be announced as early as Monday, said people who asked not to be named because the discussions are private. The talks are not final and could still fall apart, people said.

AT&T and Discovery declined CNBC’s request for comment.

The likely structure of the deal will link Discovery to WarnerMedia, a new public company jointly owned by AT&T and Discovery shareholders. AT&T is likely to spin off WarnerMedia into what is known as a Reverse Morris Trust and merge it with Discovery, people said.

AT&T shareholders will own the majority of the economy and the voting rights, the people said. The exact division between the two companies could not be determined. Discovery has a market capitalization of $ 16 billion and an enterprise value of $ 30 billion. AT&T acquired Time Warner, since renamed WarnerMedia, for an equity value of $ 85 billion in 2018.

If approved by regulators, it will effectively reverse AT & T’s longstanding plan to combine content and distribution into one vertically integrated company.

Bloomberg News first covered conversations between AT&T and Discovery about their content.