WBD/Paramount merger - Variety: The Burning Questions Swirling Around the Early Warner Bros. Discovery-Paramount Global Merger Talks

Story from Variety:

Here we go again?

Warner Bros. Discovery is flirting with the idea of acquiring Paramount Global. If a deal involving the Redstone empire comes to fruition, it would mark another transformative mega-merger for Hollywood legacy brands, following on the heels of Disney’s acquisition of 21st Century Fox in 2019, AT&T’s difficult marriage with Time Warner in 2018 and the subsequent Discovery-WarnerMedia tie-up that closed in April 2022.

Sources caution that conversations are in the earliest of early stages — following a lunch meeting this week between Warner Bros. Discovery CEO David Zaslav and Paramount Global’s Bob Bakish. There’s no certainty that a deal will come to fruition, of course, especially as Paramount Global and its parent holding company National Amusements Inc. was already being pursued. But if Warner Bros. Discovery and Paramount Global are determined to march down the aisle, Warner Bros. Discovery and Paramount Global will have to overcome a host of obstacles, and possible regulatory and legal challenges. And that’s before the integration plans are executed.

Here’s a look at some burning questions raised by the prospect of Warner Bros. Discovery buying Paramount Global.

Why does Warner Bros. Discovery want Paramount Global?

To quote Sumner Redstone, content is king. Paramount Global has a lot of aging linear assets that are struggling to adapt to a new media landscape — that’s one reason “Ridiculousness” runs nearly 24/7 on MTV these days. But Paramount Global does have vast vaults of movies, TV shows and other forms of content that can help bulk up Warner Bros. Discovery’s streaming platforms, and have remake/reboot/reimagining potential in the present IP-crazy marketplace.

Why is this happening now?

Blame Paramount Global’s stock price decline and David Ellison. Paramount Global became effectively in play earlier this month when reports surfaced that Ellison’s Skydance Media was trying to gain control of Paramount Global by scooping up some or all of the preferred shares in Paramount Global own by National Amusements Inc. (NAI). That’s the holding company controlled by Shari Redstone, daughter of the late media mogul Sumner Redstone who built up NAI and Viacom and also acquired Paramount and CBS. Warner Bros. Discovery was forced to act sooner than it would have liked by the heat behind the Skydance discussions.

How much is Paramount Global worth?

According to Wall Street, as of Wednesday, Paramount Global was worth $10.3 billion. That’s less than half of the $30 billion valuation put on Paramount Global after its last big corporate transaction, when it re-merged with CBS in 2019. (The two companies were brought together by Sumner Redstone in 2000 but separated again in 2006.) Paramount Global’s stock has been below $20 per share since May, closing Wednesday at $15.50. Warner Bros. Discovery shares have not climbed above $20 (closing Wednesday at $11.66) since it completed its acquisition of WarnerMedia from AT&T. Both companies are also burdened with debt they’ve taken on in the last decade that has become more expensive as interest rates rise.

The biggest hurdle for dealmakers may be putting a value on Paramount’s linear cable networks such as MTV, Nickelodeon, VH1, Comedy Central, Paramount Network, TV Land and more. Those channels were once the backbone of Viacom, but their value is shrinking every year as traditional cable subscribers exit for their own self-made menus of streamers. Warner Bros. Discovery already has its own legacy linear cable networks to bolster (TNT, TBS, Cartoon Network, Discovery, TLC, et al.) so a merger of the two could see mini-mergers of channels and probably the sunset of some once-stalwart cable brands.

Would Warner Bros. and Paramount Pictures remain separate or would they be combined?

It’s way to soon too formally ask the question but it’s not too soon to start thinking about the situation. A likely scenario would seem to be keeping both imprints alive — the Warner Bros shield and the Paramount mountain-and-stars logo — but to combine as much administrative and infrastructure operations as possible.

Would CNN and CBS News become one?

Again, it’s probably too soon to ask that question but the answer seems evident if the larger merger came to fruition. CNN and CBS News have had numerous courtships on and off since the 1990s. The rationale that made sense then makes even more sense now. CBS News brings the prestige factor (“60 Minutes,” the Edward R. Murrow legacy et al) while CNN provides the kind of global distribution that CBS Newsies can only dream of now. If a deal happens, bank on CBS News and CNN linking arms as fast as possible.

Might another suitor come forward for Paramount Global?

Shari Redstone certainly hopes so. By many accounts, the Paramount Global chair hopes to sell the company as a unit and not broken up in pieces. The more companies that are vying for attention, the more she can drive a deal on her terms. Over the next few weeks, she’s about to find out what the market in 2024 will bear for the media conglomerate that her father started assembling in the 1980s.