Zinger Key Points
- The storied entertainment company has a substantial debt load of $39 billion.
- CEO Zaslav is reportedly exploring asset sales and spin-offs, but hasn't hired a bank to advise the process.
Warner Bros Discovery Inc WBD shares are trading higher after reports of a significant restructuring that could separate its digital streaming and studio businesses from its traditional television networks.
What Happened: The David Zaslav-led entertainment company looks to bolster its struggling share price and manage its substantial debt load of $39 billion.
According to the Financial Times, Zaslav — who, as CEO, enjoyed a 27% increase in pay for 2023 and angered fans by canceling movies already in post-production — is eager to sell assets.
A spin-off Warner Bros. studio and the Max streaming service into a new company is also being discussed. This company would be largely free of the group’s current debt.
The media giant has not yet hired an investment bank to advise the process.
Also, informal talks with advisors to rival media companies have taken place to gauge interest in potential mergers and acquisitions.
Previous considerations included combinations with Comcast Corp’s CMCSA NBCUniversal and Paramount Global PARA, the latter of which has recently merged with David Ellison's Skydance.
Also Read: Warner Bros. Subsidiary Postpones Suicide Squad: Kill The Justice League Season 2 At Last Minute
Why It Matters: A company split could have severe repercussions for bondholders, Bank of America analysts say.
A similar move by rival Lionsgate led to a creditor revolt.
A strategic spin-off could leave the more mature television assets with the bulk of the debt, while the growing streaming and studio business would have greater financial flexibility.
WBD’s shares have plummeted nearly 70% since AT&T Inc T spun off Warner Bros and merged it with Discovery two years ago.
The company has faced declining advertising revenue, high streaming development costs, the COVID-19 pandemic, Hollywood strikes, and costly failures.
Despite cost-cutting measures and debt repayments, the stock dropped 10% in February.
BofA analyst Jessica Reif Ehrlich recently suggested that WBD’s current structure is ineffective and recommended exploring asset sales, restructuring, and mergers.
Warner Bros stock has lost over 34% in the last 12 months. Investors can gain exposure to the stock via Communication Services Select Sector SPDR Fund XLC and Vanguard Communication Services ETF VOX.
Price Action: WBD shares are trading higher by 7.45% at $8.950 in premarket at last check Thursday.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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