Warner Bros. Discovery has been facing a recent media M&A shake-up, with staffers bracing for the possibility of acquiring new corporate control in the near future.
A likely takeover candidate is David Ellison, the ambitious son of one of the world’s richest people who wants to build a Hollywood empire. Mr. Ellison just oversaw the Skydance-Paramount merger and is now aggressively pursuing an even bigger quarry with Warner Bros. Discovery.
This week, WBD Chief Executive David Zaslav and the company’s board of directors announced that they are conducting due diligence on inbound acquisition interest from “multiple parties.” The company did not name Paramount or any other companies that proposed M&A. But Ellison, with the help of his father Larry Ellison (net worth: more than $330 billion), has worked especially hard to win over WBD and Zaslav with a series of escalating offers.
Mr. Ellison proposed bids of $19, $22 and $23.50 per share in three letters to the WBD board, the last on Oct. 13, a person familiar with the matter said, corroborating the New York Times report. Considering WBD’s approximately $36 billion in net debt, the final offer would be worth an eye-watering $93 billion. (Warner Bros. Discovery stock closed Oct. 23 at $21.25 a share, up 69% since interest in Ellison was reported last month.)
In an attempt to massage his ego, Mr. Ellison even offered Mr. Zaslav the opportunity to become co-CEO and co-chairman of the Paramount-WBD merger in his latest letter. Each bid was rejected by the WBD Board of Directors. (A company representative declined to comment.)
What would happen if Paramount acquired Warner Bros. Discovery? Combining HBO Max and Paramount+, massive layoffs, etc.
Clearly, the Ellisons and their investment partners have a ceiling. They’re not going to go after Warner Bros. Discovery at all costs. Their latest offer of $23.50 per share is not the best and final offer. Now that WBD’s board has begun the M&A review process and made its books public, Paramount’s camp will have a chance to come back with a higher (or revised) bid. However, Mr Ellison is understood to believe he is in pole position among potential buyers for WBD and that the deal price is unlikely to be significantly higher.
Of course, Mr. Zaslav would like to pit rival suitors against each other in order to win the maximum amount for WBD in whole or in part. “It is not surprising that significant values in our portfolio are being increasingly valued by others in the market,” he said in a company statement on Tuesday.
Netflix, Amazon, and Apple are said to be among the potential buyers, but the deal is likely to focus only on WBD’s studio and streaming businesses. This is in line with Warner Bros. Discovery’s plan to split into two companies by mid-2026: Warner Bros., which houses HBO Max and the studio, and Discovery Global, which primarily makes up the television network. But one industry executive told Variety that for technology-oriented companies, WBD as a whole, including television networks, is “not core” to their growth strategy.
Netflix co-CEO Ted Sarandos poured cold water on the prospect of acquiring all of WBD, telling investors during the company’s third-quarter earnings call that the company is “not interested in owning a traditional media network.” Sarandos left the door open, saying Netflix could be “choosy” about its M&A goals, but added: “There is nothing absolutely necessary for us to achieve the goals we have for the business.”
In a statement, WBD said it would consider selling the separated Warner Bros. entity to a third party in parallel with the spinoff to Discovery Global shareholders. Meanwhile, there is speculation that Sony will produce a play at WBD, but sources told Variety that the company is not interested.
Comcast has been locking in Warner Bros. but is selling most of its cable TV assets to spinoff company Versant, which could complicate negotiations to buy WBD. Analysts also say Trump’s animosity toward CEO Brian Roberts gives the Ellisons, whose relationship with the president is paralyzed, a better chance to get a deal done. Trump was angered by MSNBC’s coverage of him, and once called Roberts “the chairman of Concast” and a “scumbag.”
“Given past comments from both the White House and the FCC against Comcast on just about everything over the past year, Comcast’s successful acquisition of just about anything seems highly unlikely,” Craig Moffett, principal analyst at MoffettNathanson, wrote in an Oct. 21 note to clients.
What’s behind Ellison’s desire to marry Paramount and Warner Bros. Discovery? It’s the same trend that’s swept across the media industry over the past few years, says Scott Purdy, media strategy leader at professional services firm KPMG US.
Major media companies are experiencing a decline in their linear TV businesses, and “industries that are in decline tend to consolidate,” Purdy said. “One big factor is scale,” he says.Additionally, buyers often want to acquire high-value entertainment franchises or intellectual property to keep it out of the hands of competitors, he says.
The mega-merger between Paramount and WBD will involve major layoffs and the new company will combine corporate divisions, studios, television and streaming capabilities. Meanwhile, Ellison and his team are expected to begin mass layoffs at Paramount Skydance next week, cutting about 2,000 jobs in the U.S. and making additional cuts internationally.
Speaking at the Bloomberg ScreenTime conference in Los Angeles earlier this month, Ellison denied that Paramount Skydance had made a bid for WBD. But he explained why he believes Paramount needs to further strengthen its content creation engine to achieve sustainable growth in a streaming-centric world. He even cited Zaslav’s comments from a year ago that the industry needed more consolidation.
“I think there are a lot of options (for M&A) in terms of what could actually be viable in the near future,” Ellison said. “In fact, you need more content to generate more engagement.”
Now that Warner Bros. Discovery has begun a formal M&A review process, the question is whether Ellison will come back with a higher offer and whether the WBD board believes that is indeed the best path forward.
