Strategic Moves in Media Mergers

Bringing Makan Delrahim on board from Paramount Skydance was, well, the easier part of the equation.

David Ellison, now leading this media powerhouse, is banking on his newly appointed super lawyer to convince David Zaslav to consider selling a majority, if not the entirety, of Warner Bros. Discovery.

Sources indicate that Delrahim has quickly devised a strategy to entice Zaslav into negotiations, a move that’s particularly interesting since Delrahim recently started his role as the anti-trust chief at the Justice Department. The crux of the pitch? If Zaslav resists, he might end up in a position similar to that of Shari Redstone.

This is a tad ironic, considering Skydance’s recent acquisition of Redstone’s Paramount Media Empire, which carries some diminishing assets like CBS, Comedy Central, and MTV.

Delrahim is certainly no novice in this space. His connections with the White House could give him an edge as one of the more adept deal-makers in the media realm.

However, Zaslav is no slouch either. Warner Bros. Discovery, often referred to as WBD in industry circles, doesn’t sit at the top of his priority list.

Ellison, supported by Larry Ellison—now the world’s second richest individual—seems eager to secure another major win at WBD. Meanwhile, Zaslav has engaged a Goldman Sachs banker to initiate a potential sale.

There’s considerable interest surrounding this move. While Zaslav’s stock prices have weakened and he’s generated substantial cash flow, industry veterans acknowledge that he’s made prudent decisions during his tenure.

Box Office Success

Warner Bros. has seen substantial box office revenue, being the first studio to surpass $4 billion. Add to that the success of HBO Max, which has seen a rise in subscribers, positioning it as the third-largest streaming service.

Zaslav has managed to reduce the debt resulting from Time Warner’s acquisitions, separating channels like CNN from streaming and studio operations. This restructuring not only simplifies potential sales but also positions the streaming and studio divisions as more attractive prospects, given their lower debt levels.

Insiders suggest that Goldman Sachs is drawing interest from formidable contenders, such as Netflix, Amazon, and even Apple, in a more serious capacity than what Ellison might expect.

“If Ellison wants to go this route, he’ll need to pony up significant cash,” mentioned an acquaintance of Zaslav.

In a recent leak, it was suggested Zaslav would consider offers in the $30 range per share for WBD, which Ellison has reportedly approached with a bid between $22 and $24.

Delrahim’s assessment points to only two serious contenders for WBD aside from Skydance: Netflix and Amazon.

While Netflix reigns as the top streaming service, merging with a third-ranked service poses regulatory hurdles, especially with a Trump administration overseeing regulatory compliance.

Potential Regulatory Challenges

Similar to Amazon’s acquisition of MGM Studios, which faced regulatory scrutiny, Delrahim believes existing consent rulings put Amazon’s potential deals at risk.

There are additional complexities involving the FCC and DOJ concerning antitrust regulations. If Zaslav looks to engage Apple, he might be waiting for a long time—Apple seems inclined to develop content organically rather than through acquisitions.

This has led to a quieter approach from Ellison as Skydance navigates meetings to discuss the next steps with Zaslav.

Sources reveal that Delrahim might even reach out to John Malone, known as the “Cable Cowboy,” to discuss a direct approach to WBD’s major stakeholders.

However, this isn’t Zaslav’s first rodeo, and Malone is among the heavyweights Zaslav has dealt with in the past.

Having been a protégé of Jack Welch during GE’s ownership of NBCUniversal, Zaslav is well-versed in balancing books and negotiations. His relatively modest Discovery Network successfully merged with Time Warner in 2022, creating WBD.

In essence, with the right approach, he and Goldman could potentially sway the Trump administration to approve deals with Netflix and Amazon.