Warner Bros. Discovery Now Officially Allowed to Seek M&A Opportunities; What Targets Make Sense?
Federal regulators won’t stand in the way of any deals WBD wants to make now, but its financial position may make big deals hard to find.
There’s still time to send Warner Bros. Discovery an anniversary card, though at this point it will arrive a little late. As of Monday, April 8, it’s been two years since the merger of Warner Media and Discovery in 2022. In the two years since the merger, things look a lot different for WBD from a streaming perspective; HBO Max and discovery+ content is now available on the combined Max platform, which also carries live sports and news from the company’s cable channels. The two-year mark also means that legally, WBD is now allowed to seek new merger and acquisition deals, and The Streamable will break down the best targets for the company to pursue now that it can officially use its credit card again.
- Federal regulations stipulate that a company must wait two years between large-scale deals.
- WBD is already carrying a significant debt load, but must find a way to continue scaling its streamers.
- A combination with Paramount+ or an acquisition of AMC seems to make the most sense for WBD.
Merger and acquisition rumors surrounding WBD are likely to heat up in a big way in the next few months. The passing of the two-year anniversary of the Warner Media and Discovery merger means that the Reverse Morris Trust lockdown period keeping WBD from making any big deals has ended.
WBD now has legal sanctions to pursue deals, but will its financial position allow for such opportunities? WBD still carries a debt load of more than $40 billion, and according to The Hollywood Reporter Wall Street analysts are none too bullish on its stock price. Many have revised their target price for WBD’s stock downward as it faces the challenge of declining linear revenues and no easy path to gaining new streaming customers.
“Even with progress on DTC and studio profitability, management may still be forced to explore divesting assets in order to accelerate its debt reduction and unlock value,” said MoffettNathanson analysts Robert Fishman and Michael Nathanson. “Or it may become the subject of an activist campaign looking to break up the company. Still, $40 billion-plus of debt is a significant impediment for most outsiders.”
What Could WBD Pursue to Gain Scale?
That note from MoffettNathanson makes it sound as if WBD might want to consider becoming sellers instead of buyers. But there are signs that WBD’s brass is acquisition-minded, these days; the company was first to show meaningful interest in buying Paramount Global in December 2023, though its efforts eventually came to naught.
A deal of some sort with Paramount to offer Max and Paramount+ as a combined product still makes plenty of sense, even if it’s just a soft bundle that allows viewers to access the two streamers for less. Paramount and WBD already have a good working relationship, as recent licensing deals for Star Trek movies and other content have allowed for a greater variety of content on Max. Combining the popular franchises of WBD and Paramount in one streaming offering would be a great value to customers, especially with the various sports options available on the two streamers.
AMC also must present a highly tempting target. With franchises like “The Walking Dead” and “Breaking Bad” in its arsenal, AMC has an intriguing content portfolio to offer. The company’s market cap is only $628 million, and if WBD was at least willing to entertain the notion of pursuing Paramount and its $7 billion+ cap, it could likely find the money to go after AMC. Max recently hosted several AMC series as part of a licensing deal, and AMC CEO Kristin Dolan touted the success of that deal once it ended.
Peacock is on the less-likely scale of potential targets for WBD, as it has charted its own unique path to streaming success. But a combination of Peacock and Max would create a powerful product, one with all the prestige TV of HBO and the lean-back library of NBC, with titles like “30 Rock,” “Brooklyn Nine-Nine,” “The Office” and more. The merged platform would also carry a wide range of live sports, with MLB baseball, NBA basketball, and NHL hockey from TNT and TBS combining with Peacock’s stable of “Sunday Night Football,” Big Ten football and basketball, domestic rights to the Olympics, and much more.
The world is not exactly WBD’s oyster, as the company has a massive debt load and the scrutinizing eyes of Wall Street firmly fixed on it. But now that it can officially pursue M&A opportunities, WBD has a chance to add meaningfully to the 97.7 million streaming customers it currently has by augmenting Max with new content.
Max
Max is a subscription video streaming service that gives access to the full HBO library, along with exclusive Max Originals. There are hubs for content from TLC, HGTV, Food Network, Discovery, TCM, Cartoon Network, Travel Channel, ID, and more. Watch hit series like “The Last of Us,” “House of the Dragon,” “Succession,” “Curb Your Enthusiasm,” and more. Thanks to the B/R Sports add-on, users can watch NBA, MLB, NHL, March Madness, and NASCAR events.