The future of Warner Bros. Discovery (WBD) is at a critical juncture, and the decisions made by its CEO, David Zaslav, will have far-reaching consequences. Zaslav, a dealmaker extraordinaire, is faced with a pivotal choice: sell the company or split it into two distinct entities.
Enter David Ellison, CEO of Paramount, who has expressed a keen interest in acquiring WBD. Ellison's initial offer of $20 per share was rebuffed by WBD, but he's not one to give up easily. With potential backing from his father, Larry Ellison, or a third party like Apollo, Ellison is likely to return with a higher offer, and he might even try to go directly to WBD shareholders if negotiations stall.
But here's where it gets controversial: Ellison's argument for a potential acquisition is centered around regulatory concerns, suggesting that Paramount is better positioned to navigate the scrutiny of the Trump administration. However, the real driving force behind any deal is likely the promise of increased value and content creation.
Ellison's vision for WBD is clear: he wants to scoop up the entire company before Zaslav can execute his plan to split it. Zaslav's proposed split would see HBO and the Warner Bros. studios under his leadership, while Gunnar Weidenfels would lead the former Discovery and Warner networks, along with additional debt and a stake in the studios business.
The split, expected by April, is designed to unlock value, according to Zaslav and other WBD executives. They argue that a studios and HBO business, free from debt and linear TV channels, would be highly attractive to potential acquirers. Meanwhile, the Discovery business, including CNN, would have multiple strategic options to explore, from being run for cash to becoming a rollup vehicle or even selling off assets piecemeal.
And this is the part most people miss: the post-split Warner Bros. business is seen as a "crown jewel" by influential Wall Street analysts like Jessica Reif-Ehrlich from Bank of America. She believes that, as a standalone entity, WBD's streaming and studio assets would spark a bidding war amongst potential buyers, thus maximizing the company's potential value.
But is the interest in WBD genuine, or is it a mirage? Netflix's co-CEO, Greg Peters, when asked about a potential deal, expressed skepticism towards big media mergers, citing their poor track record. Similarly, Rich Greenfield, a notable Wall Street analyst from Lightshed, doubts that Netflix would pursue a deal with WB, emphasizing the importance of original content in driving Netflix's subscriber growth.
In the near future, Warner Bros. will either find itself under the control of Skydance, led by Ellison, or it will continue on its own path, guided by Zaslav's vision. The studio's fate hangs in the balance, and the question remains: is anyone else waiting in the wings to make a move?
