Warner Bros. Discovery, the media giant behind popular brands such as Warner Bros. and HBO, is reportedly considering acquiring distressed media assets. CEO David Zaslav and board member John Malone see potential in media businesses that have suffered from financial difficulties and diminished valuations.
One factor that may make these acquisitions more likely is the exemption from antitrust laws for failing businesses. U.S. regulators are more inclined to approve acquisitions of struggling companies, which presents an opportunity for Warner Bros. Discovery.
Warner Bros. Discovery itself has been impacted by the decline in media company valuations. The streaming video losses, TV subscriber defections, and downturn in the advertising market have all taken a toll on the company. To counter these challenges, Warner Bros. Discovery is currently focused on paying down its debt and increasing cash flow in order to position itself as an acquirer rather than a distressed asset.
John Malone, known for his successful investments in distressed companies such as Sirius XM, has been influential in Warner Bros. Discovery’s strategy. Malone believes that valuations in the media industry may need to fall even further in order to gain regulatory approval for consolidation.
One potential target mentioned for Warner Bros. Discovery is Paramount Global. The market valuation of Paramount Global has slumped, and the company is burdened with significant debt. The chair of Paramount Global, Shari Redstone, is reportedly open to a transformative transaction.
However, any potential acquisition may have to wait until after the 2024 U.S. presidential election. Warner Bros. Discovery is said to be considering the acquisition of Paramount Global at that time. Another possibility is a combination of NBCUniversal and Paramount Global, which would have strategic logic but could face substantial regulatory hurdles.
Overall, Warner Bros. Discovery’s consideration of acquiring distressed media assets signals a proactive approach to navigate the challenging media landscape. While specific details and timelines are yet to be confirmed, it is clear that the company is positioning itself for future growth and expansion in the industry.
