Warner Bros. Discovery has officially acknowledged the company is up for sale, marking the third time in a decade that its storied assets have been on the auction block.
The company’s board announced Tuesday that it has initiated “a review of strategic alternatives … in light of unsolicited interest the Company has received from multiple parties for both the entire company and Warner Bros.”
The Ellison family, which owns Paramount, started the bidding late last month. With financial backing from his father, Larry Ellison, David Ellison is looking to build an entertainment juggernaut. The family and RedBird Capital Partners finalized their takeover of Paramount in August, and has since made at least one offer for its rival. Paramount wants to buy the entire company, including its basic cable channels that include CNN, TNT, Food Network and HGTV.
Warner Bros. Discovery stock soared 11% Tuesday to more than $20 a share, valuing the company at $50 billion. That’s the highest level since Discovery swallowed the larger WarnerMedia in April 2022.
The company did not disclose the other entities that have expressed interest in buying the company as a whole, or its stable of assets, including premium cable channel HBO, the HBO Max streaming service and the legendary Warner Bros. film and television studio and its campus in Burbank.
“It’s no surprise that the significant value of our portfolio is receiving increased recognition by others in the market,” Chief Executive David Zaslav said in a statement announcing the strategic review.
“After receiving interest from multiple parties, we have initiated a comprehensive review of strategic alternatives to identify the best path forward to unlock the full value of our assets,” he said.
The company last summer unveiled its intention to split into two separate publicly traded entities — an arrangement that most observers saw as the unofficial kickoff of the company’s sale.
That separation process will continue, Warner Bros. Discovery said Tuesday.
The company intended to create two stand-alone entities. One would include the Warner Bros. studio and its expansive library of shows and movies, as well as the HBO Max streaming service. Zaslav was planning to run that enterprise.
The second company, Discovery Global, would comprise the basic cable channels and international operations. Chief Financial Officer Gunnar Wiedenfels would lead that operation.
“We view this as a move to initiate the entire bidding process now, for all bidders, even though not every bidder may be interested in all of WBD,” Raymond James analysts Ric Prentiss and Brent Penter wrote in a Tuesday note to investors.
“WBD is telling other bidders they can bid now instead of waiting for the split, or perhaps they even need to bid now since waiting may prove to be too late,” the analysts said.
Warner Bros. Discovery board intends to “evaluate a broad range of strategic options,” including “an alternative separation structure that would enable a merger of Warner Bros. and spin-off of Discovery Global to our shareholders,” it said in a statement.
“Our decision to initiate this review underscores the Board’s commitment to considering all opportunities to determine the best value for our shareholders,” Warner Bros. Discovery Chair Samuel A. Di Piazza, Jr., said in the statement. “We continue to believe that our planned separation to create two distinct, leading media companies will create compelling value. That said, we determined taking these actions to broaden our scope is in the best interest of shareholders.”
The company did not set a deadline or timetable for the strategic alternatives review, although it had previously said the separation into two distinct companies — Warner Bros. and Discovery Global — would be complete by April.
TD Cowen media analyst Doug Creutz indicated Tuesday’s announcement was simply a formality because investors were well aware the company was in play.
“We continue to think a transaction with [Paramount] … is reasonably likely; we are more skeptical that other, more attractive bidders will emerge,” Creutz wrote.
The announcement hit as Warner Bros. Discovery employees already are nervous about the process and the proposed Ellison takeover, which observers believe would spark a massive consolidation and the elimination of hundreds more jobs.
Some already were suffering from deal fatigue as many are veterans of the company’s two previous sales.
In October 2016, the company, then known as Time Warner Inc., announced its sale to phone giant AT&T. President Trump, who was first elected the following month, strenuously objected to the merger. The government challenged the union, and it took nearly two years to win federal approval. The AT&T years were turbulent. The company restructured, then spent billions to build the HBO Max streaming service.
After three years, AT&T threw in the towel after lining up Zaslav, who had long managed the much smaller Discovery. The April 2022 sale to Discovery burdened the company with more than $50 billion in debt.
Since then, Zaslav and his team have tried to streamline the operations, leading to thousands of layoffs. The company’s debt now hovers around $35 billion.
Allen & Company, J.P. Morgan and Evercore have been retained as financial advisors to Warner Bros. Discovery. Wachtell Lipton, Rosen & Katz and Debevoise & Plimpton LLP are serving as legal counsel.