Warner Bros. Discovery in talks to merge with Paramount Global

[Marcel Birgelen]

Warner Bros. Discovery in talks to merge with Paramount Global

Warner Bros. Discovery CEO David Zaslav met with Paramount Global CEO Bob Bakish on Tuesday in New York City to discuss a possible merger, Axios has learned from multiple sources.

Why it matters: The combination would create a news and entertainment behemoth that would likely trigger further industry consolidation.

• Zaslav also has spoken to Shari Redstone, who owns Paramount's parent company, about a deal.
• WBD's market value was around $29 billion as of Wednesday, while Paramount's was just over $10 billion, so any merger would not be of equals.

Details: The meeting between Zaslav and Bakish, which sources say lasted several hours, took place at Paramount's headquarters in Times Square.

• The duo discussed ways their companies could complement one another. For example, each company's main streaming service — Paramount+ and Max — could merge to better rival Netflix and Disney+.
• It's unclear whether WBD would buy Paramount Global or its parent company, National Amusements Inc. (NAI), but a source familiar with the situation says that both options are on the table.
• WBD is said to have hired bankers to explore the deal.

Between the lines: The deal could drive substantial synergies.

• WBD could use its international distribution footprint to boost Paramount's franchises, while Paramount's children's programming assets could be essential to WBD's long-term streaming ambitions.
• CBS News could be combined with CNN to create a global news powerhouse. CBS' crime dramas, such as "NCIS" and "Criminal Minds," could be combined with Investigation Discovery and TruTV.
• CBS Sports' footprint could be combined with WBD's. For example, CBS and WBD's Turner Sports currently share TV rights for March Madness.

Be smart: Paramount is under enormous pressure to find a strategic partner or buyer, as it's staring down a mountain of debt.

• The firm's stock jumped 12% earlier this month following a report from Puck that Skydance Media and RedBird Capital Partners were eyeing a potential deal to buy a majority stake in NAI.
• NAI reached a deal with creditors to restructure some of its debt in September and previously slimmed down by selling Simon & Schuster. It's also in talks to unload BET.

Behind the scenes: One source familiar with the discussions says the strategy being considered mirrors Zaslav's blueprint for prior mergers.

• When merging with Scripps in 2018 and then WarnerMedia in 2022, Zaslav kept his core strategic team in place while retaining new creative talent leaders from the companies he acquired.
• Executives are confident that the deal would receive regulatory approval, despite D.C.'s active antitrust climate. Notably, Warner Bros. Discovery doesn't own a broadcast network, which would clear an easier path than would a combination with a company like NBC owner Comcast.
• A tax provision used to merge WarnerMedia and Discovery expires next year, which would legally allow WBD to explore another deal.
• Zaslav told investors last month that the company's cost-cutting measures and debt reduction now put it in a position "to allocate more capital toward growth opportunities."

Paramount, WBD and NAI declined to comment.

The bottom line: Talks between WBD and Paramount are still early and may not ultimately result in a deal. But given the acceleration of cord-cutting and the growing encroachment of Big Tech on media, neither company can remain on the sidelines for long.

Source

[Martin Brooks]

Paramount has $15.7 billion in debt and WB Discovery had $45.1 billion debt as of the third quarter, down from $49.3b at the beginning of 2023.
IMO, the FTC should not permit the deal. They stopped Paramount from selling Simon & Schuster to Pearson-Random House because it would have made PRH too big and it went to KKR instead, who will probably sell it in a few years after they take costs out of it in an attempt to increase its value. By the same logic, WB Discovery should not have Paramount and CBS.

But do I think the FTC will stop the deal? No, they'll probably permit it, but WB-Discovery will have to give up something, like having to sell off CBS' owned and operated TV stations or selling off Discovery Networks (not that I think anyone would really want them). (I don't know what WB-Discovery thinks has more value and wants more: CBS' TV shows or Paramount's movie library.)

In recent years, Paramount's film output is relatively meager and every film was a co-production, although that's common in the industry these days. I don't really see anything that's going to turn around the company's finances in a major way in 2024. Films on the slate for 2024 are: Mean Girls, The Tiger's Apprentice, Bob Marley: One Love, IF, A Quiet Place: Day One, Transformers One, Smile 2, Gladiator 2, and Sonic the Hedgehog 3.

Are there any CBS TV shows doing really well? I don't think so. Paramount+ has somewhere around 60m subscribers. Like ALL the streaming services, it's not profitable.

[Marcel Birgelen]

Has the FTC really blocked any deals recently? Usually, they only tend to delay deals, maybe enforce some low-token concessions and then the deal usually simply continues.

BTW: Frank already created a topic in another sub-forum here. Polite request to the forum masters to merge both and if that's not possible, I guess it's best to continue here.