Paramount Skydance is in the lead for the Warner Bros Discovery deal. Here’s why

David Ellison’s Paramount Skydance is seen as the top contender to buy Warner Bros Discovery, with analysts and experts saying the tech scion’s access to deep pockets and Washington ties give him an edge in what could be the media industry’s biggest merger in years.

Fresh off the Paramount-Skydance deal in August, the newly minted media mogul is eyeing one of Hollywood’s prized assets that is home to HBO, Warner Bros Studio and a streaming unit with more than 120 million subscribers.

His $60 billion approach was rejected by Warner Bros Discovery on Tuesday, Reuters first reported. But the company has put a for-sale sign and attracted other potential suitors including Comcast, Netflix and Apple, according to media reports.

POTENTIAL $74 BILLION VALUATION

At $30 a share — the price Bank of America analyst Jessica Reif Ehrlich estimates Warner Bros Discovery could fetch in a sale — the company would be valued at about $74 billion, a figure analysts say could deter some bidders but remains within reach for Ellison, whose father Larry Ellison is the world’s second-richest person with a net worth of about $330 billion.

Apple had $36.3 billion in cash at June-end and could easily raise debt to fund a takeover but it has historically avoided large deals — its biggest remains the $3 billion Beats purchase.

Netflix holds about $9.3 billion in cash and has never done a deal exceeding $1 billion, while Comcast’s $9.7 billion cash pile means any bid would likely rely heavily on debt or outside partners.

“It seems that Paramount appears to be in pole position,” said PP Foresight analyst Paolo Pescatore.

IN PARTS OR WHOLE?

Unlike Paramount, the other companies are also likely to be more interested in parts of Warner Bros Discovery than the whole company, which will saddle its buyer with around $35 billion in debt and declining cable TV assets, analysts said.

“The studio would make sense for Netflix and Apple. The TV networks would make sense for the Comcast spinoff, while the studio would make sense for what is left of NBCU,” eMarketer analyst Ross Benes said.

Netflix co-CEO Ted Sarandos on Tuesday reiterated the streamer is not interested in buying traditional TV networks but he did not mention studios.

“We’ve been very clear in the past that we have no interest in owning legacy media networks, so there is no change there,” he said during an earnings call.

Apple has also shown little appetite for cable TV assets. Still, Warner Bros’ vast film and TV library, along with HBO’s acclaimed shows, would be a strong addition to Apple TV+.

Comcast, meanwhile, is narrowing its focus to theme parks, streaming and core NBCUniversal film and TV assets by spinning off most of its waning cable networks. Buying Warner Bros would deepen that strategy, giving Universal’s parks access to lucrative franchises such as “DC Comics” and “Harry Potter”.

The President CARD

David Ellison also enjoys a unique advantage over rival bidders — his father’s close ties with U.S. President Donald The President. Larry Ellison has long been a Republican mega-donor and one of the few high-profile tech executives who were openly supportive of The President before last November’s election.

Analysts say that could help ease regulatory concerns arising from Paramount’s potential buyout of Warner Bros Discovery – a deal that would hand control of a big swathe of U.S. cable networks as well as two crucial studios to Ellison.

“If anyone does buy the whole thing, or even split it into two and buy the two bits, it’s going to have to have the blessing of the current U.S. administration,” said Clea Bourne, Head of Subject of Strategic Communications and Journalism at the Goldsmiths, University of London.

“And that’s where the Ellisons stand out very easily, because their cart is very close to the administration.”

—Zaheer Kachwala, Harshita Mary Varghese and Aditya Soni, Reuters

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