Paramount Skydance CEO David Ellison speaks in the course of the Bloomberg Screentime convention in Los Angeles on October 9, 2025.
Patrick T. Fallon | Afp | Getty Photos
Paramount Skydance has a transparent vacation want this yr: buying Warner Bros. Discovery. Fittingly, it could have to attend till Christmas to search out out if Santa Zaslav and the WBD board ship.
WBD is brazenly on the market and intends to publicly announce its plans towards the center or finish of December, based on folks acquainted with the matter, who requested to not be named as a result of the discussions are non-public. The legacy media large, run by Chief Government Officer David Zaslav, is deciding whether or not to separate the corporate in two, promote some property or promote the whole firm.
Paramount has despatched WBD’s board a number of letters explaining why its provide is extra helpful to shareholders than splitting the corporate, signaling negotiations may flip extra aggressive if WBD chooses different choices. CNBC has reviewed copies of two of the letters.
A portion of a Paramount letter dated Oct. 13 particularly particulars the corporate’s argument that its newest provide of $23.50 per share “delivers superior worth” for WBD shareholders in comparison with any affordable plan to interrupt up the corporate.
Roughly per week after receiving that letter, WBD stated it might start “a complete evaluate of strategic alternate options to establish one of the best path ahead to unlock the total worth of our property.”
The sale course of was formally launched after WBD’s announcement in June that it might break up into two corporations — a streaming and studios firm to be known as Warner Bros., which would come with WBD film properties and streaming service HBO Max, and a world networks firm known as Discovery International, which might home CNN, TNT Sports activities and Discovery, amongst different companies. Each corporations would commerce publicly on their very own.
The strategic choices aren’t mutually unique. Given an anticipated year-long (or extra) regulatory approval course of, splitting the corporate into two after which promoting one or each elements could be essentially the most tax-efficient approach to promote, based on the folks acquainted with the matter. The break up, anticipated to be accomplished by April, is a tax-free transaction.
Comcast and Netflix have proven curiosity in buying the studio and streaming property, CNBC has beforehand reported. If Warner Bros. Discovery decides its greatest value-creation path is to promote Warner Bros., it plans to make that announcement in December, earlier than the break up takes place, stated the folks acquainted.
Comcast President Mike Cavanagh stated final week in the course of the firm’s earnings report that such an acquisition could be complementary to its post-Versant-spin NBCUniversal enterprise.
Warner Bros. Discovery broadcasts third-quarter earnings Thursday morning.
Paramount’s hostile choice
Warner Bros. Discovery has rejected three totally different gives from Paramount for a full takeover of the corporate. The final, for $23.50 a share, was comprised of 80% money and 20% fairness, CNBC reported final month.
Paramount executives are keen to attend to see if Warner Bros. Discovery’s board decides to have interaction in pleasant sale discussions, based on folks acquainted with the corporate’s pondering.
However, if WBD stalls in its choice or decides to maneuver in a distinct path, Paramount has mentioned taking a proposal on to shareholders and formalizing a hostile bid for the corporate, the folks stated.
Warner Bros. Discovery requested Paramount to signal a non-disclosure settlement that features a standstill provision that might forestall Paramount from launching a hostile tender provide in return for entry to its information room, based on folks acquainted with the matter. Paramount hasn’t signed the NDA to maintain its choices open, one individual stated.
Spokespeople for Warner Bros. Discovery and Paramount declined to remark.
If Paramount appeals on to shareholders, it would argue that its provide is superior relative to Warner Bros. Discovery’s closing worth on Sept. 10, the day earlier than the Wall Road Journal reported Paramount was making ready a bid for the corporate. Warner Bros. Discovery closed at $12.54 per share on Sept. 10. A $23.50-per-share provide is 87% larger than the so-called “unaffected share worth.”
Warner Bros. Discovery must persuade its shareholders that splitting the corporate or merging certainly one of its models with one other entity, corresponding to NBCUniversal, is extra shareholder pleasant than an outright sale.
Paramount has already laid out the mathematics to Warner Bros. Discovery within the Oct. 13 letter obtained by CNBC. This is the argument from the letter, addressed to the Warner Bros. Discovery board of administrators and signed by Paramount Skydance Chairman and CEO David Ellison:
“We perceive that you just and your management group are optimistic about potential worth creation out of your deliberate break-up. Nonetheless, a extra goal evaluation yields outcomes meaningfully under the consideration to WBD shareholders in our proposal. We now have analyzed the worth of the deliberate break-up to WBD shareholders on the finish of 2028 primarily based on optimistic assumptions, together with:
- Warner Bros. outperforming consensus EBITDA by ~$500 million (10%) and buying and selling on the similar a number of as Disney, regardless of the enduring world firm that Disney represents throughout its companies
- Discovery International reaching consensus EBITDA, regardless of significant headwinds, and buying and selling on the media of analyst analysis “sum-of-the-parts” multiples for the enterprise
- An illustrative 25-40% M&A premium utilized to Warner Bros.
Primarily based on these assumptions, the deliberate break-up would generate a gift worth to WBD shareholders of lower than $15 per share on a buying and selling foundation, or ~$18 to ~$20 per share together with a sturdy, but extremely unsure, M&A premium for Warner Bros.”
Regulatory uncertainty
Paramount may also argue its deal for everything of Warner Bros. Discovery is nicely positioned to achieve regulatory approval, given President Donald Trump’s latest variety phrases about Ellison and his father, Larry, who is likely one of the world’s richest folks and who may contribute tens of billions of his private cash to assist finance a transaction.
“I feel you have got a fantastic, new chief,” Trump stated of David Ellison throughout a “60 Minutes” interview final week. “I feel probably the greatest issues to occur is that this present and new possession, CBS and new possession. I feel it is the best factor that is occurred in a very long time to a free and open and good press.”
In stark distinction, Trump has repeatedly bashed Comcast CEO Brian Roberts, together with calling him a “lowlife” and a “slimeball.“
Some analysts have speculated Comcast may attempt to construction a cope with Warner Bros. Discovery the place it might spin NBCUniversal and merge it with the studio and streaming property.
It is unclear if shareholders can be bullish on the long run prospects of both Discovery International or Warner Bros. as standalone entities.
Discovery International’s assortment of linear cable networks, corresponding to TNT, TBS and CNN, faces declining promoting charges on prime of annual cable subscriptions which might be falling by the hundreds of thousands.
Warner Bros.’s HBO Max and the Warner Bros. film studio might command a large M&A premium in a sale if Comcast, Paramount and Netflix are all potential patrons, however the worth must be excessive sufficient to persuade WBD shareholders that it is a greater choice than promoting the whole firm.
Nonetheless, even when Paramount does resolve to take a proposal on to shareholders, tender gives aren’t assure to succeed.
A threshold of simply 20% of Warner Bros. Discovery shareholders who’ve held the inventory for a minimum of a yr is required to name a particular assembly to probably struggle off a hostile bid, based on an organization submitting. These long-term Warner Bros. Discovery shareholders might argue present administration and the board are one of the best stewards of the corporate.
Disclosure: Comcast is the father or mother firm of NBCUniversal, which owns CNBC. Versant would turn out to be the brand new father or mother firm of CNBC upon Comcast’s deliberate spinoff of Versant.
