May 29, 2024

Warner Bros

A big merger and acquisition (M&A) deal could happen in 2024 between Warner Bros. Discovery and Paramount. If this deal goes through, it could boost the streaming businesses of the two media giants and their negotiating power with cable operators.

While this deal could significantly impact the businesses of the two media giants, their massive debt load could prove to be a challenge.

Top Hollywood Giants Could Unite In Merger Deal

Reports claimed that the CEO of Warner Bros Discovery, David Zaslav, was interested in merging with Paramount. However, details around this potential merger remain scanty, with no certainty over whether the deal will be finalized.

According to Axios, Zaslav met with the CEO of Paramount Global, Bob Bakish, to discuss the deal. It has triggered excitement across the media industry as it could create an entertainment behemoth, and similar deals could be unlocked soon.

Zaslav has also contacted the owner of Paramount’s parent company, Shari Redstone, about a potential deal. If this merger happens, some compromise would have to be attained as Warner Bros has a market value of around $29 billion while Paramount’s valuation is slightly over $10 billion.

According to sources that spoke to Axios, Zaslav’s meeting with Bakish happened at Paramount’s headquarters in Times Square and lasted for hours.

The two media heavyweights discussed how a merger would benefit the two companies equally. The two companies would improve upon their existing main streaming services, Paramount+ and Max. It could also help them to compete against rivals like Disney+ and Netflix.

It is also possible that Warner Bros is considering merging with Paramount Global and its parent company, National Amusements Inc. (NAI). Warner Bros has already hired bankers to explore this deal.

Creating a Competitive Edge

Paramount+ and Max are significantly smaller than streaming giants Netflix and Disney+. As such, a merger between the two could give them a competitive edge. Moreover, the two companies own major sports streaming rights that will attract sports enthusiasts.

The merged business will also have more leeway in negotiating with cable providers on the fees for being behind legacy networks such as Comedy Central and Discovery. The channels often face the challenge of poor ratings and ad sales.

Warner Bros could also use its global distribution footprint to improve upon the franchises owned by Paramount. On the other hand, the kids’ programming assets owned by Paramount will go towards improving upon the long-term streaming goals of Warner Bros.

The deal will also carry benefits in terms of news coverage as CBS News could merge with CNN, resulting in a global news behemoth. Crime dramas on CBS could also join with Investigation Discovery and TruTV.

Debt-Ridden

While a potential merger is lucrative, debt remains a major challenge, according to analysts. Warner Bros has $40 billion in debt and $5 billion in free cash flow. On the other hand, Paramount has a negative cash flow and $15 billion in debt.

If the two companies were to merge, the resulting company would have a massive debt and little funds to spend on content. Therefore, Zaslav could be forced to trim costs for the merged company.

A merged business could also be largely dependent on revenues from TV channels, a scenario that might not be very appealing to investors.

It appears that Warner Bros investors are not enthusiastic about this deal. The shares were down 3.4% on December 12 at 12:17 EST.


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