Paramount Skydance's Blockbuster Bid for Warner Bros Discovery
In July of 2024, just after Skydance's bid to acquire Paramount was finally made official, I laid out some plans for what the newly merged company should do once the deal closes to best compete. And then the deal took over a year to actually close. Still, the ideas were pretty good, apparently. Because one of them is now on the verge of happening.
And it's a big one.
As I wrote incidentally exactly 14 months ago:
There's been a lot of talk amidst the Paramount dealings that WBD might be a good home/partner. What if, once the Skydance/Paramount deal is closed, *they actually buy WBD*? Yes, there are debt issues, but a year from now, hopefully WBD head David Zaslav will have a better answer and path there. Ellison has spoken a few times about Paramount+ in particular. Most assume they'll either spin it off or merge it with another player, like WBD's Max or Comcast's Peacock. And perhaps they will. But again, I'm not sure they shouldn't just buy all of WBD to bulk up into one of the major players themselves.
Well, here's Jessica Toonkel reporting for The Wall Street Journal today:
Paramount Skydance is preparing a majority cash bid for Warner Bros. Discovery that is backed by the Ellison family, according to people familiar with the situation.
The bid will be for the entire company, including its cable networks and movie studio, the people said. Warner said late last year it planned to restructure into two operating divisions, one focused on the legacy cable-television business and the other on streaming and studios.
Ooooh, that's a bingo. In fact, it's such a bingo that it may sound obvious now. But back then, it was anything but obvious – not only because Skydance was having a hell of a time getting to a deal with Paramount, but as alluded to up above, there was a lot of talk that WBD might be the more obvious buyer of Paramount because they were the much larger entity. And, in fact, they remain the much larger entity, which remains a main complication of such a deal, as Toonkel notes:
Such a deal would be a big swing. Warner Bros.’s nearly $33 billion market capitalization is more than double that of Paramount Skydance. A bid hasn’t yet been submitted and the plans could still fall apart.
And it's not just the fact that WBD is double the size of Paramount Skydance, it's also the mountain of debt WBD is carrying, as I noted back then. And yes, WBD chief David Zaslav has been able to clean it up a bit, but the main purge was set to occur when the company split in two next year – which wouldn't happen under this new offer.
In backing up the reporting, Brooks Barnes, Lauren Hirsch, and Benjamin Mullin note for The New York Times:
Mr. Ellison is interested in acquiring the entire company, in line with his strategy of doubling down on both streaming and traditional TV, according to the people with knowledge of the plans. The bid would be made mostly in cash.
A deal to acquire Warner Bros. Discovery would be costly. The company is worth $41 billion and has $35 billion in debt, remnants of the merger that brought it to life. But the Ellison family has the means: Larry Ellison, David Ellison’s father, is the co-founder of Oracle and one of the richest men in the world, with an estimated net worth of $383 billion, according to Bloomberg.
Just yesterday, the elder Ellison actually became the richest man in the world thanks to a surge in Oracle shares after their earnings report. So yeah, they have the cash to do this. But it's still going to be insanely expensive. And undoubtedly time-consuming, given the slog the first deal went through. But it also makes some sense from a pure bulking-up into a major player, perspective. Which is exactly why I suggested they might do it.
As for why now, back to Toonkel:
By preparing a play for the company before Warner’s planned split, Paramount Skydance is attempting to pre-empt a potential bidding war for the studio and streaming unit that could include deep-pocketed technology companies such as Amazon and Apple.
A week after I wrote about Paramount Skydance buying WBD, I was off to spend someone else's money – an old favorite, Tim Cook's. While my title made the case that Apple should by HBO, the post made the case for Apple beating Skydance Paramount to the punch and buying all of WBD. While it would obviously be a headache for Apple – and Apple obviously doesn't like headaches, in particular around M&A – there's also a number of reasons why such a deal could make sense, starting at the highest level that Apple wants content and WBD has content. Some of the best content. Yes, Apple could use it to boost Apple TV+, but such IP could work in all sorts of ways for Apple. All in the name of boosting the all-important Services business.
Anyway, for now, it looks like the Skydance Paramount + WBD dance begins. But no one should hold their breath too tightly because we've seen this movie before. It ultimately ended well, but it was a horror story for a while there.
One more thing: I still like the more recent idea I had to spend Skydance Paramount's money, even with this deal: buying IMAX.
Fine, two more things: the branding possibilities are endless here. Paramount Skydance Warner Bros Discovery? PSWBD? ParSkyWarBroDis? MountDance WarBroDisco? Winner.
M.G. Siegler
M.G. Siegler
M.G. Siegler