Warner Bros. Discovery, the media conglomerate formed through the merger of Warner Bros. Entertainment and Discovery, Inc. last year, is eyeing acquisitions of distressed media companies amid their diminished valuations. Chief Executive David Zaslav and board member John Malone have shown interest in buying struggling companies that are either flirting with or filing for bankruptcy.
In recent times, media company valuations have plummeted due to various factors, including streaming video losses, TV subscriber defections, and a down advertising market. As a result, U.S. regulators may be more lenient towards large media companies coming together in order to survive.
Warner Bros. Discovery’s own market valuation has recently hit a low point, falling below $23 billion. However, the company has made efforts to alleviate its financial burden by paying down $12 billion in debt. It also expects to generate at least $5 billion in free cash flow this year.
John Malone, a prominent figure in the media industry, has a track record of profiting from distressed periods. He notably played a role in saving Sirius XM from bankruptcy. His expertise and experience could prove valuable in Warner Bros. Discovery’s pursuit of distressed media companies.
One potential target for Warner Bros. Discovery is Paramount Global, a company that has witnessed a slump in market valuation and carries a significant amount of debt. While Paramount Global’s CEO has expressed optimism about decreasing streaming losses in the future, its current situation makes it an attractive candidate for acquisition.
An acquisition of Paramount Global would be made easier for Warner Bros. Discovery due to the absence of a broadcast network in its portfolio. Paramount Global’s parent company, CBS, owns one, which could potentially complement Warner Bros. Discovery’s existing assets.
It’s worth noting that all legacy media companies are exploring potential merger synergies. However, for regulators to approve such consolidations, valuations may have to decrease further.
While a definite timeline for potential acquisitions is not yet established, industry insiders speculate that they could materialize within the next two years. The current distressed state of the media industry may provide regulatory relief, leading to a reduction in competition and presenting Warner Bros. Discovery with the opportunity to acquire assets at a discounted price.
Overall, Warner Bros. Discovery’s consideration of distressed media companies for acquisition reflects their strategy to weather the storm and solidify their position in an increasingly competitive market.
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