Warner Brothers Discovery Notes

December 22, 2023 Update
This week, David Zaslav discussed a potential merger with the Paramount Global CEO. Due to the terms of WBD’s Reverse Morris Trust deal, which facilitated the combination of Discovery and WarnerMedia, any deal execution is technically restricted until April 2024. Nevertheless, WBD has reportedly engaged bankers to explore potential deals, including Paramount or Comcast’s NBCUniversal. From a regulatory perspective, a merger with Paramount may encounter less scrutiny, given the absence of the domestic broadcast network NBC. However, in terms of leverage, NBCUniversal could be a more viable option, as Paramount Global currently carries $15 billion in debt. Personally, I’m not enthusiastic about the news of a potential deal. My initial belief was that WBD was well positioned to thrive in a linear/nonlinear world. I was excited about the possibility of WBD buying back undervalued stock once it pays down debt. If WBD proceeds with a merger, leverage will increase again, and share buybacks will be further delayed.

June 28, 2022 Update

Warner Bros. Discovery Is An Undervalued Spinoff In Deleveraging Mode

– Good Seeking Alpha article. Interestingly, the article highlights that JPMorgan (investment bankers) estimated equity value at $59.8BN to $127.1BN (vs. current market cap of $34BN) in the merger proxy.