Warner Bros. Discovery chairman emeritus John Malone has weighed in on the company’s recent move to put itself up for sale, telling Charlie Rose that he sees a $30 per share takeover bid as “possible.”
During an Oct. 23 interview on his podcast, Rose asked Malone about his thoughts on a research note from Bank of America’s Jessica Reif Ehrlich that pegged the potential value of a takeover bid for the company at $30 per share.
“I think it’s possible. It’s certainly something to be hoped for. The potential value is there to some of these other companies, if they’re allowed to do it,” Malone said. “The accretion, the synergy in some of these combinations, would be very large.”
While Malone acknowledged that he hopes for a bidding war, he said a deal would ultimately come down to “who the government would let own it.”
When asked if he believed Comcast could secure regulatory approval, Malone said he believes those shareholders “can have ownership in a company that combines Warner with Comcast, with NBCUniversal.” However, he questioned whether Comcast CEO Brian Roberts would be able to have “effective, hard control” of the combined company.
“I don’t know that one. I put a question mark on it,” Malone said. “But I believe that if Brian is willing to reduce his level of control of the resulting combination, then I think a deal could be done and get through regulatory approval. But these are all fine-tuning things.”
He also addressed a potential combination between Warner and Netflix, noting it would give the latter a studio, a huge library and a second “more adult-oriented” streaming service that they could bundle.
“I don’t know. I’m just thinking, I’m really just speculating and I’m really not supposed to do that, because I’m an insider,” he cautioned. “No, there are lots of combinations you could contemplate, depending on regulatory approval that would be very accretive for both companies and, therefore, justify pretty high valuation.”
Thus far, the Warner Bros. Discovery board has reportedly rejected three different takeover offers from Paramount, ranging from $19 to $23.50 per share.
The New York Times reported that Paramount CEO David Ellison has argued that his company would be the “best partner” for Warner, adding that other potential acquirers would need to overcome “significant (perhaps insurmountable) hurdles given their dominant market positions.”
In order to sweeten the bid, he even offered WBD CEO David Zaslav a co-CEO and co-chairman title, as well as increasing the portion of the bid paid in cash to shareholders from 60% to 80% and increasing the breakup fee from $2 billion to $2.1 billion.
“It would be improper for me to disclose any particulars. We have clearly had expressions of interest from Paramount. We’d actually had many discussions with Paramount over the last couple of years about everything from merging streaming services to other forms of working together,” Malone said. “I think the whole media is going to have to consolidate and rally its resources if it’s going to successfully survive against Big Tech.”
WBD has since launched a strategic review, citing “unsolicited interest” from “multiple parties” for all or part of the company.
In addition to continuing on with its planned split into Warner Bros. and Discovery Global, which is on track for completion in April, the company’s board will also consider separate transactions for those two companies or a deal for the entire combined company. WBD further stated it would consider an alternative separation structure that would enable a merger of Warner Bros. and a spin-off of Discovery Global to its shareholders.
“We’ve been struggling with perhaps a little too much of a debt load that came out of the merger. We paid off a lot of debt, but at this point, we probably can’t shrink the debt as fast as we need to and so we basically felt we needed to do something different,” Malone said of the split. “The business was going to take a couple more years to really reach the original image, which was a globally distributed Warner Bros./HBO on the back of a globally distributed Discovery.”
“We’re working on it and we’re growing rapidly. But the thought was that we needed to separate the linear business, largely driven in the future by sports, from the entertainment studio business, largely going to be distributed in a streaming fashion,” he continued. “And we announced that that separation, we restructured our balance sheet in order to permit that separation, and we started to receive interest in the company from a number of different directions. I think it’s still the intent of the company to pursue that split and development absent a superior proposal from a number of interested parties.”
Netflix co-CEO Ted Sarandos reiterated during the company’s third quarter earnings call earlier this month that it has “no interest” in acquiring legacy media networks, but said that the company believes it can and will be “choosy” with regard to M&A.
“It’s true that historically, we’ve been more builders than buyers, and we think we have plenty of runway for growth without fundamentally changing that playbook. Nothing is a must have for us to meet our goals that we have for the business,” he explained. “But we focus on profitable growth and reinvesting in our business, both organically and through selective M&A. And when it comes to M&A opportunities, we look at them, and we look at all of them.”
Netflix has reportedly tapped the investment bank Moelis & Co. to explore a potential bid for the company’s studio & streaming assets. Netflix and Moelis declined to comment.
“It’s our responsibility to look at every significant opportunity,” co-CEO Greg Peters added. “We’ve got a clear framework to evaluate those opportunities and we’ll do whatever we think is best to grow the business.”
Meanwhile, Comcast president Mike Cavanagh suggested the company would be open to taking a look at a potential bid for the studio & streaming assets following its cable network spinoff into Versant despite its “very high” bar for M&A.
Experts previously told TheWrap that, while a Comcast bid for Warner Bros. makes strategic sense, it would face challenges securing regulatory approval from the Trump administration and beating the deep pockets of the Ellison family.
When asked about the feasibility of a bid, Cavanagh said that he thinks “more things are viable than maybe some of the public commentary that’s out there.”
