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- Warner Bros. Discovery said it's considering a sale for the entire company, causing shares to jump 10%.
- The company also continues to pursue a spinoff of its cable assets.
- David Zaslav aims to position Warner Bros. Discovery as two leading media companies.
David Zaslav is seeking a bidding war for Warner Bros. Discovery.
Warner Bros. Discovery said it's reviewing a potential sale of all or parts of the company, citing unsolicited interest in the entire entity, even as it continues to pursue a spinoff of its cable assets, which is already underway.
The news, which sent shares soaring more than 10%, follows reports that David Ellison's Paramount Skydance, with backing from his billionaire father, Oracle's Larry Ellison, is pursuing a bid for WBD as he builds a media and tech powerhouse.
"We continue to make important strides to position our business to succeed in today's evolving media landscape by advancing our strategic initiatives, returning our studios to industry leadership, and scaling HBO Max globally," said Zaslav, president and CEO of Warner Bros. Discovery, in an announcement. "We took the bold step of preparing to separate the Company into two distinct, leading media companies, Warner Bros. and Discovery Global, because we strongly believed this was the best path forward.
"It's no surprise that the significant value of our portfolio is receiving increased recognition by others in the market," he added. "After receiving interest from multiple parties, we have initiated a comprehensive review of strategic alternatives to identify the best path forward to unlock the full value of our assets."
WBD said there's no deadline or timetable set for completion of the review process and that it may not decide to pursue any transaction at all.
Why a deal for all of WBD makes sense
Consolidation in media and entertainment has long been predicted. The rationale is that only a few companies will win the streaming wars, and the biggest have the best chance of success. Many analysts see a tie-up of WBD and Paramount Skydance as inevitable.
Separately, they're still bit players in streaming, but the rationale is that combined, they could mount a real challenge to Netflix and Disney. Antitrust concerns that might otherwise exist could be mitigated by the fact that Larry Ellison has close ties with President Donald Trump. And the elder Ellison has the money, as one of the world's richest men.
Together, WBD and Paramount Skydance could slash costs, increase their libraries, and achieve streaming scale by combining their platforms while slowing the decline of their linear TV business, LightShed Partners wrote in an October 20 research note.
And for the Ellisons, bidding now makes sense because it would take advantage of a friendly White House and keep a split WBD out of competitors' hands, LightShed wrote.
There's also no other obvious bidder for all of WBD. NBCUniversal parent Comcast would likely face regulatory hurdles because a deal would lead to increased concentration in the TV news business.
Other companies, such as Netflix and Apple, have the means but have historically not been buyers of big Hollywood studios. They likely wouldn't be interested in WBD's cable channels and have been quite able to access its prestige HBO shows by licensing without owning them.
By opening itself up to a sale of parts of the company, WBD could hope to spark interest in a bidding war for its prized HBO. There, again, potential buyers are seen as unlikely bidders. The WBD board could be betting that the prospect of such a war could lead Paramount Skydance to swoop in and pay more to ensure it gets the whole company.
It's hard to see another company seriously going up against the Ellisons' money and risking the potential for retaliation from a presidential administration that's been quick to go after and wring big financial settlements out of perceived political opponents (see Disney, CBS).
Announcing a formal strategic review and openness to sell parts of the company is WBD's way of eliciting other bids or, at the very least, pushing up a Paramount Skydance offer, Raymond James wrote in a note after WBD's announcement.
"We do think there are several parties that could ultimately be interested particularly in the WB side, that would at least look at the book. But we feel investors should not interpret this language as definitive confirmation yet that WB(D) will get multiple bidders or a bidding war," said James.
To be sure, the success of a WBD-Paramount Skydance tie-up wouldn't be guaranteed. Paramount+ and HBO Max combined would still rank fifth among streamers in TV watchtime in July, according to Nielsen — behind YouTube, Netflix, Disney+ with Hulu, and Amazon Prime Video. Mashing up both streamers would be expensive and time-consuming, and wouldn't necessarily lead to subscriber growth.
For Hollywood's creative community, a combination of the two companies would mean one fewer buyer for TV shows and movies, further consolidating Tinseltown. And bringing CNN under the same roof with CBS could give Trump more influence over the news Americans see.
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