In a significant move within the media landscape, David Ellison‘s Skydance Media has recently completed an $8 billion takeover of Paramount Global. Just five weeks into this merger, the company is already undertaking substantial cost-cutting measures, including laying off over 2,000 employees. However, Ellison, the son of tech magnate Larry Ellison, is reportedly considering a staggering $70 billion-plus bid to acquire Warner Bros. Discovery (WBD) in its entirety. The timing of this potential acquisition raises questions: Why is Skydance pursuing this deal now?
Speculation suggests that waiting for WBD to split into two separate entities—Warner Bros. (comprising HBO Max and studios) and Discovery Global (which includes various TV networks)—might be a more prudent strategy. This separation, as outlined by CEO David Zaslav, is expected to be finalized by April 2026 and aims to enhance the value of WBD's streaming and studio operations by divesting the declining television segment. By opting for a deal with a standalone Warner Bros., Paramount Skydance could avoid the liabilities associated with the Discovery Global segment, particularly its substantial debt. Importantly, acquiring Warner Bros. would still allow Skydance access to HBO Max, a critical growth driver in today’s competitive streaming market.
Analysts suggest that a Larry Ellison-backed merger and acquisition (M&A) strategy for WBD may have been part of the Skydance vision all along. This approach aims to consolidate media assets during a period marked by instability in the industry, building a conglomerate with a primary focus on streaming, along with TV and film production capabilities. Robert Fishman, an analyst at MoffettNathanson, noted that moving now could preempt a bidding war for Warner Bros. assets after the anticipated split. “By acting now, Paramount Skydance positions itself to secure the entire company before rivals can cherry-pick the most attractive assets,” he remarked.
Before the news of Paramount Skydance’s potential bid for WBD broke, Wells Fargo media analyst Steven Cahall identified standalone Warner Bros. as an appealing M&A target. He noted that Netflix emerged as the most compelling buyer, with other major players like Amazon, Apple, Comcast, Sony, and Paramount Skydance also in the mix. Cahall emphasized that the separated Warner Bros. streaming and studios division would represent the only large intellectual property (IP) asset available in a market where most studios and streaming services have ambitious growth plans.
According to Cahall, the estimated value of a standalone Warner Bros. is around $65 billion. However, any offer from Paramount Skydance would encounter significant financial and regulatory hurdles, potentially even more formidable than those faced during the Skydance-Paramount merger. Following speculation about a bid, Warner Bros. Discovery shares surged by 29%, elevating the company's market value to approximately $40 billion. When factoring in debt, the enterprise value of WBD reaches about $71 billion, a stark contrast to the financial outlay for the Skydance-Paramount merger.
Experts like Kenneth Leon from CFRA Research have pointed out that WBD's high debt leverage could impede any substantial bid for its shares. He indicated that even if Paramount Skydance secures a deal for WBD in its entirety, it may primarily focus on the Warner Bros. business, without deriving significant value from the Discovery Global portfolio. MoffettNathanson’s Fishman speculated that significant synergies could exist between the TV offerings of both companies, potentially leading to further layoffs as part of the merger process.
The merger between Paramount and Warner Bros. Discovery may face additional scrutiny from regulators, given that it represents a more horizontal combination of two media giants compared to the previous Skydance-Paramount merger. Senator Elizabeth Warren has already voiced opposition, describing the merger as a “dangerous concentration of power.” The previous administration approved the Skydance-Paramount merger after key concessions were made, including hiring an ombudsman for CBS News and refraining from diversity initiatives.
As the media landscape continues to evolve, the implications of a potential Paramount-Warner Bros. merger remain to be seen. Whatever unfolds, it appears that Zaslav’s vision for media consolidation is coming to fruition, setting the stage for a new era in the industry.
