Warner Bros Discovery and Paramount CEOs hold exploratory merger talks

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Warner Bros Discovery and Paramount Global are in early talks to merge, in a media deal that would combine the owner of HBO and CNN with the studio behind the Mission Impossible films and CBS News. 

Warner chief executive David Zaslav and Paramount chief Bob Bakish discussed a possible deal over lunch in New York this week, according to two people familiar with the matter. The talks were at an early stage and a deal might not materialise, these people cautioned.

The talks, first reported by Axios, come as US media groups are struggling to improve their profitability after waging a costly “streaming war” against Netflix. Entertainment giants including Warner, Paramount and Disney have been on a cost-cutting mission as they try to shrink losses running into the billions of dollars from their video streaming services.

Analysts have predicted a shakeout among smaller media companies that compete against much larger tech groups — including Netflix, Apple and Amazon — for a finite number of subscribers. Warner owns the Max streaming service, which could be combined with Paramount Plus if a deal were to materialise.

Warner and Paramount had stock market capitalisations of $28bn and $10bn respectively, as of Wednesday.

Both companies have large debt loads, however: Warner’s net debt stood at $43bn at the end of September, while Paramount had $14bn in net debt. Paramount’s net debt stands at 6.1 times its earnings before interest, tax, depreciation and amortisation, while Warner’s was 4.1 times, according to analysts at Bernstein.

Paramount’s controlling shareholder had also recently held talks about its possible sale to Skydance, the production company behind Top Gun: Maverick, according to people familiar with the matter.

Paramount is controlled by Shari Redstone, the daughter of the late Sumner Redstone and scion of the billionaire family whose media business dates back to a drive-in cinema chain founded by her grandfather.

Redstone has long said Paramount was not for sale. But Paramount’s board of directors recently approved “golden parachute” bonuses for Bakish and other senior executives, prompting speculation that she was open to offers.

The talks were said to be “very early”, and the structure of the deal that created Warner Bros Discovery, which closed in April 2022, has a provision barring the company from doing another deal until April 2024 at the earliest.