Warner Bros Discovery looks to avoid break-up with smaller asset sales

After mulling a possible break-up, Warner Bros. Discovery executives are now looking to pursue smaller asset sales instead, according to the Financial Times. The outlet noted that the David Zaslav-led media giant has been evaluating all options as its stock price has declined 67% since the April 2022 merger.

However, senior management reportedly determined that splitting its linear networks and some or all of its roughly $39 billion in debt from its streaming and studio businesses would create “very significant operational challenges” and could trigger lawsuits from the company’s debt investors. Sources told FT that the split was viewed as a potential “nuclear option.”

Instead, the company is reportedly looking at selling smaller assets, such as Polish broadcaster TVN or a stake in Warner Bros. Discovery’s video game division. However, it appears to be stopping short of selling CNN, with a source telling FT that the bar for divesting the news network would be “very, very high” because of its strategic importance as well as a deal’s tax implications.

Bank of America has previously estimated that CNN could be worth $6 billion if potentially spun off, while Warner Bros. Games could be worth $5.6 billion and Poland’s TVN could be worth $3.5 billion.

A spokesperson for Warner Bros. Discovery declined to comment.

The reported move away from a possible break-up comes as Warner Bros. Discovery has been cutting costs through other means, such as layoffs, content write-offs and selling off smaller assets like All3Media, as it looks to reduce its debt and turn the company around.

Citigroup analyst Jason Bazinet has estimated that a split-up firm could be worth $67.2 billion, or roughly $11 per share. He believes the network business could be worth $42.5 billion and the studio and direct-to-consumer business worth $24.7 billion. According to the Financial Times, Warner’s management team believes a turned-around company’s true market capitalization could be $60 billion, or $25 per share.

Shares of WBD fell 2% during Tuesday’s trading session, with its market capitalization sitting at $19.13 billion. On Wednesday, Warner Bros. Discovery will report its earnings for the second quarter of 2024. TheWrap