David Ellison‘s Skydance Media just completed the $8 billion takeover of Paramount Global five weeks ago. Now, before Ellison and his team have even finished the work of laying off upwards of 2,000 employees at the newly merged Paramount Skydance to slash costs, the son of tech multibillionaire Larry Ellison is mulling what would currently be a $70 billion-plus deal to acquire Warner Bros. Discovery in its entirety.
The question is: Why now?
Wouldn’t it make more sense to wait until WBD splits in half — to form Warner Bros. (HBO Max and studios) and Discovery Global (TV networks) — a transaction CEO David Zaslav says is on track to be done in April 2026? The WBD separation is designed to boost the value of its streaming and studios businesses by carving off the declining TV arm. Paramount Skydance could make a play for the standalone Warner Bros. without assuming the baggage (including the lion’s share of WBD debt) of the entity that will house CNN, TNT, TBS, Discovery and other nets. And through a deal for standalone Warner Bros., Paramount Skydance would still get its hands on the key growth driver going forward: HBO Max. (The mind reels at what a fused HBO Max-Paramount+ might be rebranded.)
One possibility is that a Larry Ellison-backed M&A play for WBD has been part of the Skydance strategy all along. The idea would be “to consolidate media assets during a period of industry-wide instability and build a conglomerate with a streaming-first focus wrapped with TV and film studios and potentially a larger linear television portfolio,” MoffettNathanson analyst Robert Fishman wrote in a research note Thursday.
And the advantage of moving now is that it could “preempt a potential bidding war for only the Warner Bros. Streaming & Studios assets post-split,” Fishman noted. “By acting now, [Paramount Skydance] positions itself to secure the entire company before rivals can cherry-pick the most attractive assets.”
Indeed, prior to news of Paramount Skydance’s prepping a bid for WBD, which was first reported by the Wall Street Journal, Wells Fargo media analyst Steven Cahall issued a note that pegged the future standalone Warner Bros. as “an attractive M&A candidate” — with Netflix “the most compelling buyer,” and other potential suitors including Amazon, Apple, Comcast, Sony and Paramount Skydance.
Regarding the separated Warner Bros. streaming and studios biz, Cahall wrote, “This will be the only large IP asset for sale at a time when most studios/streamers have big aspirations.” The analyst acknowledged that Netflix has not historically made any big M&A deals. But he opined a Netflix takeover of Warner Bros. had a number of benefits, including being able to “kickstart” a theatrical strategy for the streamer, help it scale video games and “most importantly [provide] premium content to members.” Cahall calculated the value of standalone Warner Bros. at around $65 billion.
To be sure, any Paramount Skydance offer for Warner Bros. Discovery would face big financial and regulatory obstacles — arguably much greater than Skydance-Paramount merger.
After Warner Bros. Discovery shares zoomed up 29% on the potential Paramount bid, WBD now has a market value of $40 billion. When adding in debt (minus cash and equivalents), the enterprise value of Warner Bros. Discovery is now about $71 billion. And that is a far bigger price than the Ellisons paid to swing Skydance-Paramount.
“We think the high debt leverage of WBD is an impediment to a high bid for WBD’s shares,” Kenneth Leon, director of industry and equity research at CFRA Research, said in a Sept. 11 note. He suggested that, even if Paramount Skydance wins a deal for Warner Bros. Discovery as a whole, it may “be only interested in the businesses that will become Warner Bros. and not see meaningful value creation from the Discovery Global media portfolio.”
But MoffettNathanson’s Fishman speculated that Paramount Skydance could see big benefits by pooling its TV business with WBD’s. “Overall, we would expect material cost synergies from the overlapping cable networks,” he wrote — i.e., layoffs. Fishman added there there are “presumably a high level of synergies from combining CBS News with CNN plus the long-term existing partnership between CBS and Turner with the NCAA’s March Madness Final Four.”
Then there’s the question of whether a Paramount-WBD tie-up could get regulatory approval, as it represents a more horizontal combination of two media giants than Skydance-Paramount. Skydance was largely a production company, with limited overlap with Paramount Global.
Already coming out against the notion of a combined Paramount-Warner Bros. Discovery was Sen. Elizabeth Warren (D-Massachusetts), who wrote in a post on X Thursday that such a media merger “must be blocked as a dangerous concentration of power.”
The Trump administration OK’d the Skydance-Paramount merger, after Skydance made key concessions to the FCC including hiring a CBS News ombudsman to vet complaints of “bias” and promising to never bring back diversity, equity and inclusion (DEI) initiatives at the company. But Warren and others have alleged Paramount Global’s $16 million payment to Trump to settle his lawsuit (alleging CBS News’ “60 Minutes” deceptively edited an interview with then-VP Kamala Harris) was a “bribe” to get Trump’s blessing on their deal while Warren also called out Trump’s claim that the new owners of Paramount promised $20 million worth of free advertising. “Remember when Trump announced a multimillion-dollar secret deal with CEO David Ellison? And then — shocker — Trump approved Ellison buying CBS/Paramount,” Warren wrote in the post. “Now, Ellison wants to take over CNN/Warner Bros.” (Skydance and Paramount said they complied with all U.S. laws throughout the merger process, including antibribery laws.)
Whatever scenario ultimately unfolds, Zaslav for one seemingly will see his wish for media biz consolidation realized.
After Trump was elected to a second term in November 2024, Zaslav expressed optimism the new administration would facilitate industry M&A. Trump 2.0, Zaslav said, “may offer a pace of change and an opportunity for consolidation that may be quite different” and that it may “provide a real positive and accelerated impact on this industry that’s needed.”
Source link
