Why the Warner Bros. Discovery Sale Just Got More Interesting

WBD CEO David Zaslav has officially put his company on the blocks. One big question: Will he sell all of it? Or just part of it?David Jon/Getty Images for HBO MaxWarner Bros. Discovery says it's for sale.That's not news — the company has been in play for weeks, because Larry and David Ellison's Paramount has been circling it.But now WBD has thrown in a wrinkle, by suggesting that it might sell part of the company.Warner Bros. Discovery, the conglomerate that owns HBO, CNN, and the Warner Bros. studio, has officially hung a "for sale" sign on itself.But wait a minute. Didn't Paramount owners Larry and David Ellison already offer to buy WBD? So wasn't it already for sale?Yes, they did. And yes, it was.So the right way to view WBD's announcement Tuesday morning, where it said it would conduct "a review of strategic alternatives to maximize shareholder value" is primarily a formality: WBD has rejected Paramount's bid to buy the company at a reported $20 a share, and wants to see if it can find other bidders to drive up the price. Bankers and lawyers are standing by, and WBD's team would love to give potential bidders a tour of the property.That's it. That's (mostly) the whole thing.Next question: Are there any other bidders?WBD says there are. But note the wording: The company mentioned "unsolicited interest the Company has received from multiple parties for both the entire company and Warner Bros."Which, if you break it down, means: "We have at least one offer for the entire company, and at least another offer for the really valuable part of the company — our studio and streaming business."That's an important distinction. Here's why: Prior to Paramount bidding for the entire company, WBD planned on splitting itself into two companies. One company would be made up of assets lots of people might want to own — its studio and streaming businesses. The other would be way, way less attractive — its collection of cable TV networks.So splitting them up, the logic goes, would increase WBD's total value — because investors or acquirers who just wanted the "good" part of WBD's business could get that, without being weighed down by its cable TV business. (Comcast is doing a similar split.)Big Tech companies like Apple, for instance, have been interested in buying HBO in the past, but wanted no part of buying cable TV networks when that industry appears to be in terminal decline.And some people believe Paramount offered to buy all of WBD not because it really wanted all of WBD's business — but because doing so was cleaner and faster than getting in a bidding war with the likes of Apple for the business it actually wants.But now WBD is saying that it's willing to consider exactly that kind of transaction: Instead of splitting itself into two companies, it will just sell off the part of the company people really want. Which is, more or less, what Rupert Murdoch did in 2017, when he sold much of his Fox empire to Disney — an example people around WBD are happy to float right now.And if that's really happening, then the WBD sale story gets much more interesting. Prior to Tuesday, it was hard to imagine anyone interested in competing with the Ellisons — partly because Larry Ellison is the second-richest man in the world, partly because Larry Ellison's closeness with Donald Trump makes a deal more likely to pass regulators, and partly because no one else wanted everything the Ellisons were offering to buy.But if WBD is really willing to sell its prime real estate, things get more interesting. Apple would almost certainly take a look at Warner Bros. and HBO. So would Comcast. And even Netflix — though co-CEO Greg Peters was pretty dismissive of big M&A earlier this month — might reconsider.Read the original article on Business Insider

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