The For Sale sign is fully lit on Warner Bros. Discovery, and three legitimate bidders are putting together offers: David Ellison’s Paramount Skydance (which wants the whole enchilada) and Netflix and Comcast (which are eyeing the WB streaming and studio operations).
Warner Bros. Discovery has set a Nov. 20 deadline for first-round bids, which would be nonbinding, sources told Variety, confirming an earlier report by the Wall Street Journal. The board is expected to meet before Thanksgiving to evaluate the offers and aims to have the process wrapped up by year-end.
Of course WBD, which has rejected an Ellison bid of $23.50 a share, could stay on its original course and split in two — with David Zaslav heading Warner Bros. (HBO Max and studios) and current CFO Gunnar Wiedenfels leading the TV-centric Discovery Global. But the board, if it is really acting in the best interests of shareholders, will be forced to accept a bid that results in the maximum windfall.
A stand-alone Warner Bros. would have an enterprise value of $44 billion (and $37 billion equity value), per estimates by Wall Street research firm MoffettNathanson. Zaslav’s hypothesis is that Warner Bros. streaming and studios, separated from the flagging TV biz, would be worth more than it is as part of the current WBD. The question is how aggressive the Ellisons, Netflix and Comcast will be in trying to land what could be a once-in-a-blue-moon chance to seize the assets of one of Hollywood’s legendary companies.
Here’s a look at each potential bidder’s position.
Paramount Skydance
One of Ellison’s key arguments is that he is the best dance partner for Warner Bros. Discovery compared with the other two leading contenders. He and his father, Larry Ellison, are friendly with Trump. And there are regulatory pitfalls with Comcast and Netflix. (More on that later.) Ellison is a motivated bidder, and the logic is that combining Paramount Skydance with WBD would produce a scaled-up powerhouse that emerges as one of the biggest in media and entertainment.
But at the same time, Ellison is signaling that he’s not irrationally exuberant: He told investors last week on Paramount Skydance’s first earnings call, “It’s important to know that there’s no must-have for us. We really look at this as buy-versus-build, and we absolutely have the ability to build to get to where we want to go.” What about antitrust issues with Paramount-WBD consolidating two major studios? The Ellison camp would suggest that such a union introduces a far stronger competitor to the likes of Disney and Netflix. The Ellison family (i.e., Larry) is fully backstopping the play for WBD, with participation from RedBird Capital, which helped fund the Paramount Global deal.
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Netflix
In public, co-CEOs Ted Sarandos and Greg Peters have stayed on message about the streaming heavyweight historically leaning on the “build” side of the build-versus-buy question. But the chance to snap up Warner Bros., with its deep film and TV library, extensive production capabilities and HBO Max, is an opportunity they would be remiss not to investigate. Netflix has the stock (with a $470 billion-plus market cap) and cash on hand ($9.3 billion) to make a credible bid; an offer would likely be all-stock. But the streamer isn’t in spend-at-all-costs mode either. Note that Netflix passed on outbidding Ellison for UFC rights, which Paramount acquired in a $7.7 billion seven-year deal with Ari Emanuel-led TKO Group.
There’s also an antitrust concern with Netflix getting its hands on HBO Max and the Warners studios biz — one that Rep. Darrell Issa, R-Calif., raised in a Nov. 13 letter to Trump officials before a bid was even in. “With more than 300 million global subscribers and a vast content library, Netflix currently wields unequaled market power,” Issa wrote. And among other complications, Netflix would have to figure out how Warners fits into its anti-theatrical stance. If Sarandos chose to simply slot the WB slate into the Netflix streaming queue, that’s bad news for exhibitors. In any case, there’s irony that Netflix is in a position to acquire Warner Bros., coming 15 years after then-Time Warner chief Jeff Bewkes derided the streamer as “the Albanian army.”
Comcast
The cable and media giant is undergoing its own split, as the Versant cable TV vehicle readies to push off from NBCUniversal by year-end. Comcast co-CEOs Brian Roberts and Mike Cavanagh, like Ellison, see huge synergy opportunities by combining HBO Max with Peacock and merging Warner Bros. studios into Universal. Unlike Ellison, though, they don’t want to buy WBD’s cable networks (CNN, TNT, HGTV, Food Network and the rest). On the downside, Comcast shares are near a 14-year low, which presents a challenge in the face of Netflix’s robust stock and the massively wealthy Larry Ellison. Roberts was said to be recently scouting for outside investors to back Comcast’s Warner Bros. bid. Meanwhile, there’s the Donald Trump factor: The president has heaped scorn on Roberts over the coverage he’s seen on left-leaning MSNBC (now MS NOW), and some analysts say that personal enmity could doom Comcast’s chances.
There’s another potential scenario: one in which Netflix gets the Warner Bros. studios, to be led by Zaslav, and Comcast buys HBO Max. But this would be a logistical and regulatory minefield, and it’s not clear everyone would be on board. “Greg and Ted really want this, but Reed [Hastings, Netflix’s chairman] doesn’t want to deal with the regulatory hassles,” an industry insider says.
Amid all this, what does David Zaslav want? “Zaslav wants the biggest crown that gives him the biggest portfolio,” a well-connected exec says. In the current crucible of at least three competing bids, this person adds, he and the company’s board “might just be trying to run up the price.”
From Variety US