Warner Bros.’ sale talks have heated up. Discovery after the board rejected Paramount’s initial offer
Paramount, backed by billionaire Larry Ellison and his family, has officially opened bidding on rival Warner Bros. Discovery, a potentially massive merger that would dramatically change Hollywood.
Warner Bros.’s board of directors rejected the deal. Discovery Paramount’s initial offer was $20 a share, but talks are ongoing, according to two people close to the companies who were not authorized to speak publicly.
Paramount was preparing a second screening, one of the sources familiar with the matter said.
Warner Bros. owns Discovery channels HBO, CNN, TBS, Food Network, HGTV and Warner Bros. Studios. Film and TV in Burbank.
Ellison, one of the world’s richest men, is committed to helping his 42-year-old son, David, complete the industry-reshaping takeover, and has agreed to help finance the bid, two people familiar with the situation said.
The younger Ellison, who entered the film world 15 years ago by launching his production company Skydance Media, jumped into the big leagues this summer with the Ellison family’s purchase of a controlling stake in Paramount.
Since then, David Ellison and his team have taken bold steps to help Paramount emerge from more than a decade of stagnation. The purchase of Warner Bros. Discovery is the boldest move yet. The merger would eliminate one of Hollywood’s original film studios, and could see CNN merge with Paramount-owned CBS News.
Representatives for Paramount and Warner Bros. Discovery declined to comment.
CNBC reported on Friday Two companies were in the discussions For weeks after news last month that Paramount was planning to make a bid. Bloomberg reported on Saturday that Warner Bros. Discovery rejected the offer Paramount’s offer is about $20 a share.
Industry experts were astonished by the speed of Paramount’s bid for Warner Bros. Discovery, noting that top executives had begun working on the bid even as they were finalizing the Paramount acquisition.
One of Paramount’s top executives is former Goldman Sachs banker Andy Gordon, who was a senior member of Red Bird Capital Partners, the private equity firm that teamed up with Ellisons and has a significant stake in Paramount.
Paramount’s interest sent shares of both companies soaring, sending Warner Bros.’s market capitalization soaring. Discovery.
Paramount’s $20-a-share offer for Warner Bros., sources said. Discovery was worth less than some analysts and sources thought parts of the company were worth, prompting Warner Bros.’s board of directors to… Discovery declined the offer.
But many believe Paramount needs more content to better compete in a landscape dominated by tech giants like Netflix and Amazon.
Paramount has reason to move quickly.
Warner Bros. Discovery had previously announced that it plans to divide its assets into two companies by next April. One company, Warner Bros., will consist of HBO, the streaming service HBO Max, and film and television studios in Burbank. Current CEO David Zaslav will manage this project.
The other arm will be called Discovery Global and consists of linear cable TV channels, which have seen their fortunes decline as consumers turn to streaming.
Paramount’s offer was seen as an attempt to sneak in because other large companies, including Amazon, Apple and Netflix, may have been interested in buying the studios, streaming service and lush studio space in Burbank.
However, Netflix co-CEO Greg Peters appeared to downplay Netflix’s interest during an appearance last week at the Bloomberg Screentime media conference. “We come from a deep heritage of being builders, not buyers,” Peters said.
Some analysts believe Paramount’s proposed takeover of Warner Bros. Discovery could ultimately prevail because Zaslav and his team made significant cuts over the past three years to drive profits for various businesses after purchasing the company from AT&T, leaving the company saddled with a heavy debt burden. The company has paid off billions of dollars in debt, but still carries nearly $35 billion in debt on its books.
Others point to Warner Bros. The recent box office successes are proof that Paramount is offering too little.
Despite the turmoil at the corporate level, Warner Bros. has succeeded. The film studio had a successful year. Its fortunes turned around in April with the release of “A Minecraft Movie,” which grossed nearly $958 million worldwide, followed by a string of hit films including Ryan Coogler’s “Sinners,” James Gunn’s “Superman” and the horror film “Weapons.”
Meanwhile, Paramount was on a buying spree.
In just the past two months, Paramount closed a $7.7 billion deal to acquire the UFC media rights and closed two deals that will pay the creators of “South Park” more than $1.25 billion over five years to secure the broadcast rights to the popular cartoon.
Last week, at Bloomberg’s Screentime media conference, Ellison declined to comment on Paramount’s pursuit of Warner Bros. Or even whether his company has already made an offer. But he touched briefly on inclusion in Hollywood, saying: “Ironically, it was David Zaslav who said last year that inclusion in media is important.”
He added: “There are many options available,” but he refused to go into details.
After news of Paramount’s interest emerged, Warner Bros. Discovery stock jumped more than 30%. It rose as much as $20 a share, but closed Friday at $17.10, down 3.2%.
Paramount also saw its shares rise by about 12%. Shares closed Friday at $17, down 5.4%.
Warner Bros. Discovery is now $42 billion. Paramount is much smaller, worth about $18.5 billion.