What happens next with Warner Bros. Discovery is the burning question in Hollywood right now.
Kicking off a flurry of takeover rumors was a report from The Wall Street Journal last month that had Paramount preparing a bid for WBD. It was a shocking development, with Paramount having just finished its merger with Skydance and David Ellison assuming the CEO role, and WBD CEO David Zaslav reaffirming his plans for a split of his company just a day earlier.
WBD’s stock price reflects expectations for an acquisition, with shares up 41% from its closing price on Sept 10, the day before the WSJ report came out. Paramount shares are up 20% over that same period.
It’s fitting that WBD is at the center of all this attention. After all, no other modern media company has been reimagined, pushed and pulled, lauded and eviscerated more than the entity known today as Warner Bros. Discovery, starting back in 1969 when a New York City parking lot mogul named Steve Ross merged his company Kinney National with Warner Bros.-Seven Arts.
The company that traces its modern origins with that deal is poised for yet another chapter of wrenching change, a reflection of the steady stream of consolidation that has hit the media industry and caused Hollywood to pivot and pivot again following each transaction.
Since that initial report, we’ve seen other possible names get looped into the mix as potential buyers for WBD, including Netflix, Amazon, Comcast and Apple, although you’ll have to take that chatter with a grain of salt.
Here’s a breakdown of what could happen to WBD with three possible (and one unlikely) scenarios:
Option 1: Paramount buys WBD
According to insiders at Paramount and Warner, the bid to make a deal is very real.
So why the delay? For one thing, Paramount was busy with another acquisition, the $150 million purchase of The Free Press this week, which brought over founder Bari Weiss to be the editor-in-chief of CBS News. With that deal complete, Paramount and Ellison could be freed up to refocus on WBD. That said, Ellison deflected when pressed on Thursday at Bloomberg’s Screentime conference on whether Paramount has made a bid that was turned down by WBD. Perhaps the two companies are locked in a quiet game of “The Price Is Right.”
The rise in the stock price likely complicates matters as well. The 40% increase in WBD’s stock means that buying the company got significantly more expensive. MoffettNathanson analyst Robert Fishman projected that an “attractive” bid now would be a 25% to 35% premium to the current share price, or around $22.06 to $23.83 a share.
That could be why reports from the New York Post have Paramount potentially partnering with Apollo to help shoulder the load.
Keep in mind, Apollo last year put in an $11 billion bid to buy Paramount in a deal ultimately won by Skydance.
Apollo declined to comment on whether it would be joining Paramount in any bid.
“The way we approach everything is first and foremost, what’s good for the talent community, what’s good for our shareholders and value creation and what’s good for basically, storytelling at large,” Ellison said this week. “I actually do think there’s a lot of options out there in terms of what actually might be actionable in the near future. We would approach that through the lens of wanting to make more, not less.”
Option 2: Another bidder shows up
One reason why Paramount would go after WBD now as opposed to after it goes through with its planned split into Warner Bros. and Discovery Global would be to get ahead of any potential bidding wars.
“By acting now, Paramount positions itself to secure the entire company before rivals can cherry-pick the most attractive assets,” Fishman wrote last month shortly after the initial report.
But a bid could induce other companies to come in given the attractiveness of some of the assets, particularly Warner’s studio business, which is on a stellar run this year with hits like “Minecraft,” “Sinners” and “Weapons.” The question, however, is who would show up?
Netflix co-CEO Greg Peters on Wednesday poured cold water on the notion that the streamer would be active in any deal. “One should have a reasonable amount of skepticism around big media mergers — they don’t have an amazing track record over the history of time,” he said at the Bloomberg Screentime conference.
A Netflix spokeswoman declined to comment, deferring to Peters’ comments.
“Netflix is simply not going to spend $75-$100 billion to acquire Warner Bros. Discovery,” Lightshed analyst Rich Greenfield said in a research note.
In July before the report came out, Comcast CEO Brian Roberts said his bar for acquisitions was “very high,” especially since the company is busy spinning off its own cable assets into a separate company called Versant.
A Comcast spokesman declined to comment, deferring to those prior remarks.
Spokesmen for Apple and Amazon didn’t respond to TheWrap’s request for comment. And while their names have been excluded, it’s partially because both companies have the cash to spare. But it’s unclear if either would want the whole company, which leads us to our next scenario.
Option 3: Nothing happens and the split continues
Given the amount of opposition a deal would face, particularly from the Hollywood community dreading the thought of losing another major studio, there’s an outside chance nothing happens. There’s also the case to be made that Paramount is better off not making a deal.
“When you think about David Ellison’s vision for Paramount, his family’s financial firepower, and the impressive executive hires they have made in recent weeks, we cannot help but think the optimal strategy for Paramount is to build and invest in its content, the Paramount+ streaming platform, and marketing vs. make a dramatically larger acquisition,” Greenfield said.
That would mean WBD CEO David Zaslav’s original plan to split the company by April would be underway. Zaslav believes the two separate businesses could unlock more value than they would together, according to a knowledgeable insider.
Still, with so much chatter about a deal, it’s hard to see the companies around WBD standing still until then.
The X factor
Perhaps the least likely but still possible scenario is that an activist shareholder emerges and forces an ownership change based on WBD’s long-moribund stock price.
An incoming bidder could squash the Ellison gambit with a generous bid — if one has the appetite to put up those numbers. That’s not immediately clear given the debt load on WBD and whether companies can get a real return on all of its assets.
Lucas Manfredi contributed to this story.
