Paramount CEO David Ellison is pursuing a significant acquisition of Warner Bros. Discovery (WBD). This move follows the appointment of Makan Delrahim, a former antitrust chief, who is now strategizing on Ellison’s behalf. Delrahim aims to persuade David Zaslav, WBD’s CEO, to consider selling the company.
Background on Recent Acquisitions
The urgency in this endeavor has its roots in past media transactions. Paramount recently acquired Shari Redstone’s media properties, including CBS and Comedy Central, for approximately $8 billion. This deal emphasizes the shifting dynamics in media ownership.
Current Market Context
Warner Bros. Discovery is currently an attractive entity in the media landscape. It is the first studio to surpass $4 billion in box office earnings in 2023. HBO Max has also shown profitability and garnered swift subscriber growth, positioning it as the third-largest streaming platform. Zaslav has worked to reduce the debt from the Time Warner acquisition and is strategically separating its cable channels from its streaming and studio operations. This makes parts of WBD potentially easier to sell.
Competitive Landscape
Zaslav has engaged Goldman Sachs to explore options for WBD, attracting interest from major players, including Netflix, Amazon, and Apple. Industry insiders note that these companies may offer better valuations than what Ellison has suggested. Reports indicate Ellison might propose a bid in the range of $22 to $24 per share, while Zaslav is expected to seek upwards of $30, particularly for the streaming and studio divisions.
Challenges Ahead
- Regulatory Concerns: Amazon faces scrutiny with a consent decree from the Federal Trade Commission (FTC), which could complicate any deal.
- Deal Complexity: Merging two significant streaming services, such as Netflix and WBD, would pose challenges given current regulations.
- Industry Dynamics: Apple is focusing on organic content development and may not be a potential buyer.
Next Steps for Paramount
Delrahim’s expertise positions him as a key player in this negotiation. He may seek input from influential figures like John Malone, a substantial shareholder in WBD. However, Zaslav’s experience in the industry, including his previous mentorship under Jack Welch, places him in a strong position to navigate these discussions.
As this deal unfolds, the response from the market and Zaslav’s strategy will be critical. The coming weeks may reveal more about the potential acquisition and the competitive landscape of the media industry.
