\n\tIt may not be a coincidence that Comcast and Amazon were revealed Thursday as donors to President Donald Trump\u2019s beloved new 90,000-square-foot White House ballroom<\/a> (for which he has been razing the East Wing).<\/p>\n \n\tThe cascade of events promises to dramatically reshape the U.S. media business, with a fabled Hollywood studio, a top purveyor of prestige TV and a cable news mainstay all poised to change hands. The roster of major studios would shrink to four. The disorienting quality of the past few days owes a lot to the fact that Paramount itself finally completed its merger with Skydance<\/a> just two months ago. During the 18-month saga leading up to the close of that transaction, there were times when it looked like the century-old studio might cease to exist.<\/p>\n \t\t\t\t\t\t \t\t\t\t\t\t\t\t\tGetty Images<\/p>\n \n\tThe latest in the trio of bids by David Ellison<\/a>\u2018s Paramount, first reported by the New York Times and later confirmed by Deadline, was on October 13 for $23.50 a share. WBD<\/a> rejected all three and the board declared publicly that it was launching a \u201cstrategic review\u201d<\/a> after receiving interest from multiple parties, carefully referring to \u201cinterest\u201d vs actual offers. As other potential suitors circle, the prevailing opinion is that WBD is PSKY\u2019s to lose, especially given that a key financial backer of Paramount is Larry Ellison, the Oracle co-founder who is currently the second richest person on the planet.<\/p>\n \n\tThe WBD board couldn\u2019t \u201cignore the escalating sorties to acquire the company or they would have problems. If they were saying they weren\u2019t interested, they\u2019d have a problem. Of course they\u2019d be interested,\u201d says Eric Schiffer, head of Beverly Hills-based family office Patriarch Organization.<\/p>\n \n\tBofA Securities analyst Jessica Reif Ehrlich estimated WBD\u2019s consolidated takeout value at about $30 a share \u2013 some $26 per share for Warner Bros. and $4+\u00a0for Discovery Global. Others Wall Streeters, at least initially, found that number much too high. The stock price, which foundered since Discovery acquired WarnerMedia from AT&T in April 2022, hit a three-year high Wednesday after the company announced its formal auction process. It closed Friday at $21.15, tripled in value from a $52-week low of $7.49.<\/p>\n \t\tBidding \t<\/p>\n \n\tOverlaying any WBD auction is a separate process the company previously announced to split in two by mid-2026<\/a>. In preparation, last December it restructured into two operating units<\/a>, one for the Warner Bros. studio and HBO Max streaming, and the other for linear TV networks. Post-split, the stand-alone companies, to be called Warner Bros. and Discovery Global, would be run by WBD CEO David Zaslav<\/a> and WBD CFO Gunnar Wiedenfels, respectively.<\/p>\n \n\tWBD has said it will entertain offers for all of the company or either of its two segments as it continues to pursue a separation. But it will also consider an \u201calternative separation structure\u201d that would enable a merger of Warner Bros., the more in-demand asset, and a spinoff of Discovery Global to shareholders.<\/p>\n \n\tZaslav has expressed a preference for the split scenario, according to people in his camp, believing it can unlock more value. Even so, he has a legal fiduciary duty to shareholders not to slow-walk the bidding process for the whole company while working to finalize the split. Announcing a formal auction, as WBD did, acknowledges that obligation and also allows it to take control of the process. <\/p>\n \n\tAt this stage of the M&A sequence, a company hires financial advisors and, generally, prepares financial information to share with potential bidders. Once they sign a non-disclosure agreement, bidders are welcomed to submit non-binding preliminary offers, or indications of interest.<\/p>\n \t\t\t\t\t\t \t\t\t\t\t(L-R0 David Zaslav and David Ellison<\/p>\n \t\t\t\t\t\t\t\t\tGetty Images\/Paramount<\/p>\n \n\tSerious bidders are invited to examine its books in more detail in a date room and submit second-round bids, or letters of intent, before progressing to a \u201cbest and final,\u201d non-binding offer. The company then picks one suitor to conduct due diligence during an exclusive period, when final negotiations are held before either a binding offer is inked or the parties move on. <\/p>\n \n\tWBD said Allen & Company, J.P. Morgan and Evercore are serving as its financial advisors, and Wachtell Lipton, Rosen & Katz and Debevoise & Plimpton are serving as legal counsel. It\u2019s early days still and there are variations on the process, which depends in part on multiple suitors showing up. WBD declined to comment on where things stand or give a timeline. But the auction provides a framework for any party to step up.<\/p>\n \n\tIn its pursuit of Paramount, the home of CBS and the former Viacom controlled by Shari Redstone, Skydance sweetened and refined its offer multiple times over months of drama. The bidding process featured some exclusive windows for Skydance but also periods when offers came in from Sony and Apollo or consortiums led by Barry Diller and Edgar Bronfman Jr. In an SEC filing Thursday, Paramount Skydance reported $138\u00a0million of merger-related costs incurred by Paramount and $3 million by Skydance, consisting mainly of banking, legal, advisory and other professional fees.<\/p>\n \n\tA person familiar with PSKY\u2019s thinking said the David Ellison company is looking to engage in a fair process for WBD.<\/p>\n \n\tOne of PSKY\u2019s bids, the Times first reported, offered Zaslav a top role in the company as co-chairman and co-CEO, which stymied many observers. Ellison is the chairman-CEO of Paramount Skydance with seasoned executive Jeff Shell, former head of NBCUniversal, reporting to him as president. It\u2019s not clear if that concession (which came in the second offer) to Zaslav, a two-decade veteran of the corner office since his time running Discovery, will still be operative.<\/p>\n \t\tNetflix Head-Scratcher\t<\/p>\n \n\tComments by Netflix co-CEOs Ted Sarandos and Greg Peters during the company\u2019s quarterly earnings interview<\/a> this week signaled to some on Wall Street that the giant streamer may make a play for WBD. At the very least, they did not vanquish speculation that it has a degree of interest in exploring a bid. \u00a0<\/p>\n \n\t\u201cWe\u00a0view\u00a0it\u00a0as\u00a0notable that [Netflix] did not rule out prospective M&A\u201d when asked about industry consolidation on a webcast after reporting quarterly earnings,\u201d BofA\u2019s Ehrlicgh wrote in a note to clients. \u201cTo be clear,\u00a0the company\u00a0reiterated there is no interest in acquiring cable linear networks, however they\u00a0could\u00a0be interested in buying IP that can strengthen their entertainment offering\/existing capabilities\u00a0and accelerate their\u00a0strategy.\u201d<\/p>\n \n\tSpecifically, Sarandos said Netflix has been \u201cvery clear in the past that we have no interest in owning legacy media networks, so there is no change there.\u201d And he talked a lot about IP.<\/p>\n \n\t\u201cWhen it comes to M&A opportunities, we look at them, and we look at all of them,\u201d he said, with the bar being, first, \u201cIs it a big opportunity? Second, if it\u2019s IP, does it strengthen our entertainment offering?\u201d he said.<\/p>\n \n\t\u201cWe believe the potential combination of Warner Bros.\u2019\u00a0best-in-class IP and library matched with\u00a0NFLX\u2019s best in class distribution would be a\u00a0strong\u00a0combination,\u201d Reif Ehrlich said.<\/p>\n \n\tIs there a gap between the two CEOs on this strategic question?<\/p>\n \t\t\t\t\t\t \t\t\t\t\tTed Sarandos and Greg Peters<\/p>\n \t\t\t\t\t\t\t\t\tNetflix<\/p>\n \n\tAt a Bloomberg conference the week before earnings, Peters called the chance of a bid for WBD \u201cunlikely.\u201d<\/a> He throws shade on big media deals at every opportunity, this week calling them a lazy and probably doomed way for the industry to address its many challenges. \u201cYou have to do that by the hard work of developing those capabilities in the trenches day to day,\u201d he said on the earnings call. \u201cYou don\u2019t get there simply by buying another company that is also still developing those same capabilities.\u201d<\/p>\n \n\tMichael Morris of Guggenheim wrote that Netflix management stopped \u201cshort of denying potential M&A interest on the back of the recent WBD announcement,\u201d while emphasizing \u201cthe ability to be \u2018choosy\u2019 on investments and citing a clear framework to evaluate opportunities.\u201d<\/p>\n \n\tAlicia Reese of Wedbush Securities sees a path for the streamer to swoop in. \u201cNetflix clearly has no intent to acquire any legacy media properties,\u201d she wrote in a client note. \u201cBut for the right price, Netflix may find value in leveraging its massive global user base against WB\u2019s deep catalog. Netflix has partnered with WB to license its content with a major content deal after its merger with Discovery. While Netflix could benefit from owning a vast array of this catalog, it may be more fruitful to continue to license selectively from the subsequent owner.<\/p>\n \n\t\u201cOf course, the various media companies vying for WBD or parts of it are likely to push the price higher, which we think pushes Netflix out of the ring as it has made clear that it does not require M&A to meet its growth targets,\u201d she said.<\/p>\n \n\tTo some, however, a Netflix deal seems nuts given the company\u2019s stated disdain for theatrical.<\/p>\n \n\t\u201cWhy Would Netflix Spend $75 Billion to Shutter Most of Warner Bros?\u201d asked Lightshed Partners\u2019 Richard Greenfield in the headline of an emphatic note, which featured a catalog of assets that would be divested. \u201cSo, we are to believe Netflix is seriously considering a $75 billion acquisition so it can shutter most of the cashflow of the acquired company in hopes of mining the library to create new content and using the increased library content to attract more subscribers and increase engagement to drive pricing power and reduce churn? Anything is possible, obviously, but this feels like a stretch.\u201d<\/p>\n \n\tThe $75 billion implies a $60 billion acquisition and the assumption of $15 billion in debt, assuming WBD\u2019s current approximate $30 billion debt load is split 50-50 between Warner Bros. and Discovery Global.<\/p>\n \n\t\u201cKnowing the way they have always talked about theatrical, and knowing that they want IP, I see a contradiction there,\u201d says one former studio executive. Netflix has so much capital given its muscular share price that it could afford to unload assets it doesn\u2019t desire for a fraction of the value because it wants that IP.<\/p>\n \t\tThe Rest Of The Field<\/strong>\t<\/p>\n \n\tAmong big tech players, \u201cAmazon for sure is a possibility, more so than Apple, because they get it on the efficiency side and can infuse those assets in way that benefits the overall company,\u201d meaning mostly subscriptions to its flagship Prime loyalty program, says Schiffer of Patriarch.<\/p>\n \n\tPatriarch has a position in Apple. Schiffer says CEO Tim Cook is a great leader but notes as have other investors that the company has struggled to gain momentum with its AI strategy. Apple has the advantage of a \u201ctremendous installed base,\u201d but challenges loom. In May, OpenAI acquired io, the startup of Apple\u2019s former design chief Jony Ive, to develop a new family of products integrated with generative AI technologies. Ive was crucial to Apple, designing the original colorful iMac, the iPhone, iPad and Apple Watch. He left the company in 2019 to start his own design collective, LoveFrom.<\/p>\n \n\tSo a massive entertainment deal is a \u201chard ask\u201d for Apple right now, he said. It\u2019s worth noting that despite its massively deep pockets, the company\u2019s largest acquisition to date is a $3 billion deal for Beats in 2014.<\/p>\n \n\tAt Comcast, Brian Roberts has actively pursued studio deals in the past. He made a play for Disney<\/a> with a hostile takeover offer in 2004 that was rejected by shareholders. He also went after Fox, getting outbid by Disney but pushing up the price. Closing the $71.3 billion deal for most of 21st Century Fox saddled the Mouse with more debt that it would have liked, and six years later the transaction is widely viewed as an expensive miss for Disney\u2019s Bob Iger.<\/p>\n \n\tComcast also has its own corporate maneuvers to attend to, chief among them spinning off most of NBCUniversal\u2019s cable networks into a stand-alone public company called Versant<\/a>. The parent\u2019s core broadband business has been wobbly and it\u2019s in the midst of a fix there. Roberts, along with MSNBC and NBC, has been a frequent punching bag for Trump. There is an ongoing DEI inquiry at the Brendan Carr-led FCC, which would have to approve a WBD merger given the NBC broadcast licenses involved. Wall Street just doesn\u2019t see how the company could prevail in the current regulatory regime \u2013 ballroom or not.<\/p>\n \n\t\u201cGiven past commentary against all-things-Comcast from both the White House and the FCC over the past year,\u201d MoffettNathanson\u2019s Craig Moffett noted, \u201ca successful Comcast acquisition of almost\u00a0anything\u00a0seems nearly unthinkable.\u201d<\/p>\n \n\tAlphabet, parent of Google and YouTube, gets floated in some conversations about the pool of would-be WBD acquirers but it is a definite wild card. \u201cThey don\u2019t need to do it. But that\u2019s the company I keep wondering about,\u201d says one media investor.<\/p>\n \n\tSony would probably be interested. It took a stab at Paramount with Apollo, bowing out as Skydance increasingly claimed the inside track. But financially it would be a really heavy lift. And this time around, the private equity giant is said to be working with the Ellisons on their bid.<\/p>\n \t\tWinner\u2019s Circle\t<\/p>\n \n\t\u201cMy guess is it\u2019s David Ellison\u2019s to lose,\u201d is a commonly expressed opinion \u2013 that Paramount will ultimately end up with WBD since it has both the cash and the approving eye of the president.<\/p>\n \n\t\u201cI think it\u2019s the only realistic bidder for the whole thing. They have a lot of advantages that make them the best bidder. And WBD\u2019s going public was in response to the likelihood that Paramount was going to go hostile,\u201d says one industry insider. \u201cThey are in the driver\u2019s seat.\u201d <\/p>\n \n\tWBD stock has risen 17% this week alone, giving hope to investors long dismayed by it languishing in single digits for years. Shares would fall if Paramount walks. \u201cThere\u2019s a known offer out there. Take the win. Take the bird in hand,\u201d said one fund manager.<\/p>\n \n\t\u201cI think Donald Trump would be delighted to see the family win it,\u201d says Schiffer.<\/p>\n \n\tLarry Ellison, father of David Ellison, is a Trump donor and friendly with the president, appearing in the Oval Office as part of a major U.S. AI initiative. Trump in recent weeks has confirmed the relationship, calling the Ellisons \u201cfriends\u201d and \u201csupporters.\u201d And while getting Paramount-Skydance over the FCC\u2019s finish line was no cake walk, things have changed. Paramount settled a dubious lawsuit<\/a> with Trump. Ellison agreed with the FCC to rein in DEI, name an ombudsman for CBS<\/a> and hire Bari Weiss<\/a> to run it.<\/p>\n \n\tRELATED: \u2018CBS Evening News\u2019 Only Broadcast Network To Say Nothing On-Air About Trump Pardon Of Money-Laundering Crypto CEO Wit<\/a>h<\/a> Biz Connections To POTUS Family<\/a><\/strong><\/p>\n \n\t\u201cThey cater to what he wants. They donate to his causes, and Trump loves that,\u201d says one Wall Streeter. \u201cIt was hard getting Paramount past the finish line \u2026 but it\u2019s a completely different landscape.\u201d<\/p>\n \t\t\t\t\t\t \t\t\t\t\t(L-R) Donald Trump speaks at the White House alongside SoftBank CEO Masayoshi Son, Oracle CTO Larry Ellison and OpenAI CEO Sam Altman<\/p>\n \t\t\t\t\t\t\t\t\tPhoto by Andrew Harnik\/Getty Images<\/p>\n \t\tAntitrust Bust\t<\/p>\n \n\tThat said, even if Paramount succeeds in clinching a deal for WBD and gets the greenlight from the Trump administration, it will for sure face political blowback from Democrats, even though Congress does not have the power to block a merger.<\/p>\n![\"The](\"https:\/\/deadline.com\/wp-content\/themes\/pmc-deadline-2019\/assets\/public\/lazyload-fallback.jpg\")
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