AT&T has agreed to spin off and combine WarnerMedia with its rival Discovery in a multibillion-dollar deal to create a media empire that has the programming heft to compete with Disney and Netflix in a global streaming race.

The move will create the second largest media company in the world by revenue after Disney. It comes just three years after AT&T paid $85.4bn for the owner of CNN, HBO and Warner Bros and reflects the break-neck pace of change for traditional US media groups attempting to reinvent themselves as streaming services.

Under the proposed tie-up, one of Hollywood’s most prized portfolios — including Warner Bros film and television studios, the HBO network and a portfolio of cable channels including CNN — will be brought together with the “real life” output of Discovery, whose brands range from sport and wildlife to home renovation.