
Tero Vesalainen
By Breakingviews
Merger talks between Paramount International (PARA) and Warner Bros. Discovery (WBD) set the scene for future M&A drama. But when Paramount is in play, it’s not clear that WBD boss David Zaslav, or his $28 billion leisure empire, are greatest suited to the main position in a possible deal.
Zaslav and his Paramount counterpart Bob Bakish met this week to debate a possible tie-up, in talks first reported by Axios. That implies Paramount’s controlling shareholder Shari Redstone, whose household agency Nationwide Amusements owns 77% of Paramount’s voting inventory, is open to the thought. She ought to be: Nationwide Amusements took a $125 million capital infusion from funding financial institution boutique BDT & MSD Companions in Could and weathered a credit standing downgrade.
There’s some logic to a WBD-Paramount tie-up. Zaslav would achieve entry to U.S. broadcaster CBS, which lately locked in the appropriate to broadcast Nationwide Soccer League video games for the following decade. A mixture of Warner Bros, the studio behind “Barbie,” with Paramount, proprietor of the Mission Unimaginable and High Gun franchises, would make it the most important in Hollywood by field workplace ticket gross sales this 12 months, in accordance with MoffettNathanson.
However WBD would face competitors. Skydance, a agency backed by buyout big KKR, could also be enthusiastic about buying the $10 billion Paramount, or simply the Redstones’ voting stakes, in accordance with an individual aware of the state of affairs. Apple (AAPL) and Amazon.com (AMZN) with their large urge for food for content material would undoubtedly take an in depth look. And there’s time for an public sale. WBD would battle to shut a deal till April anyway if it desires to completely notice tax perks from the merger that created it in 2022.
Zaslav has some heavy lifting forward, although. Paramount has a number of debt, and so does WBD. Crunching the 2 companies collectively would depart them with web borrowings equal to a cumbersome 4.4 instances their EBITDA this 12 months, primarily based on LSEG estimates and Breakingviews calculations. They may pay a few of that down by promoting elements like cable channels MTV and Nickelodeon, however that provides complexity and danger. WBD inventory fell 6% on Wednesday.
For now, the purpose is that the phrase is out: Paramount is on the block, and a takeover of some variety is prone to be one among 2024’s huge media sector nailbiters. Whether or not Zaslav emerges because the star of that drama, or simply an additional, is but to be seen.
Context Information
Warner Bros. Discovery is mulling a possible merger with rival U.S. media firm Paramount International, Reuters reported on Dec. 20, citing a supply aware of the matter. WBD’s Chief Govt David Zaslav and Paramount boss Bob Bakish met for a number of hours to debate a potential deal, in accordance with Axios, which first reported the talks. Paramount owns cable channel MTV and broadcaster CBS. Nationwide Amusements, a movie show chain owned by the Redstone household, holds 77% of Paramount’s voting shares. The Redstone household has additionally been in talks with Skydance, a personal equity-backed leisure firm based by David Ellison, the son of Oracle founder Larry Ellison, in accordance with numerous information experiences.
Authentic Put up
Editor’s Observe: The abstract bullets for this text had been chosen by Searching for Alpha editors.