Paramount Skydance CEO David Ellison speaks through the Bloomberg Screentime convention in Los Angeles on October 9, 2025.
Patrick T. Fallon | Afp | Getty Photographs
Paramount Skydance has a transparent vacation want this 12 months: buying Warner Bros. Discovery. Fittingly, it might have to attend till Christmas to search out out if Santa Zaslav delivers.
Warner Bros. Discovery is overtly on the market and intends to publicly announce its plans towards the center or finish of December, in keeping with individuals accustomed to the matter, who requested to not be named as a result of the discussions are non-public. The legacy media big, run by Chief Government Officer David Zaslav, is deciding whether or not to separate the corporate in two, promote some property or promote your entire firm.
Paramount has despatched Warner Bros. Discovery’s board a number of letters explaining why its provide is extra worthwhile to shareholders than splitting the corporate, signaling negotiations might 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 every week after receiving that letter, WBD mentioned it could start “a complete assessment of strategic alternate options to establish the perfect path ahead to unlock the complete worth of our property.”
The sale course of was formally launched after WBD’s announcement in June that it could cut 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 worldwide 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 can be essentially the most tax-efficient technique to promote, in keeping with the individuals accustomed to the matter. The cut 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 finest value-creation path is to promote Warner Bros., it plans to make that announcement in December, earlier than the cut up takes place, mentioned the individuals acquainted.
Comcast President Mike Cavanagh mentioned final week through the firm’s earnings report that such an acquisition can be complementary to its post-Versant-spin NBCUniversal enterprise.
Warner Bros. Discovery pronounces third-quarter earnings Thursday morning.
Paramount’s hostile resolution
Warner Bros. Discovery has rejected three completely different presents 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 prepared to attend to see if Warner Bros. Discovery’s board decides to have interaction in pleasant sale discussions, in keeping with individuals accustomed to the corporate’s considering.
However, if WBD stalls in its resolution or decides to maneuver in a unique course, Paramount has mentioned taking a suggestion on to shareholders and formalizing a hostile bid for the corporate, the individuals mentioned.
Warner Bros. Discovery requested Paramount to signal a non-disclosure settlement that features a standstill provision that will stop Paramount from launching a hostile tender provide in return for entry to its knowledge room, in keeping with individuals accustomed to the matter. Paramount hasn’t signed the NDA to maintain its choices open, one individual mentioned.
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 Avenue Journal reported Paramount was getting 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 should persuade its shareholders that splitting the corporate or merging one among its models with one other entity, resembling NBCUniversal, is extra shareholder pleasant than an outright sale.
Paramount has already laid out the maths 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 have now 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 identical a number of as Disney, regardless of the enduring world firm that Disney represents throughout its companies
- Discovery International attaining 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.
Based mostly 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 strong, but extremely unsure, M&A premium for Warner Bros.”
Regulatory uncertainty
Paramount also can argue its deal for the whole lot 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 without doubt one of the world’s richest individuals and who might contribute tens of billions of his private cash to assist finance a transaction.
“I believe you may have an ideal, new chief,” Trump mentioned of David Ellison throughout a “60 Minutes” interview final week. “I believe the most effective issues to occur is that this present and new possession, CBS and new possession. I believe 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 might attempt to construction a cope with Warner Bros. Discovery the place it could spin NBCUniversal and merge it with the studio and streaming property.
It is unclear if shareholders will likely 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, resembling TNT, TBS and CNN, faces declining promoting charges on high of annual cable subscriptions which can 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 possibility than promoting your entire firm.
Nonetheless, even when Paramount does resolve to take a suggestion on to shareholders, tender presents aren’t assure to succeed.
A threshold of simply 20% of Warner Bros. Discovery shareholders who’ve held the inventory for at the very least a 12 months is required to name a particular assembly to doubtlessly battle off a hostile bid, in keeping with an organization submitting. These long-term Warner Bros. Discovery shareholders might argue present administration and the board are the perfect stewards of the corporate.
Disclosure: Comcast is the father or mother firm of NBCUniversal, which owns CNBC. Versant would turn into the brand new father or mother firm of CNBC upon Comcast’s deliberate spinoff of Versant.