NEW YORK: Investment bankers and would-be buyers have been eyeing potential assets that might be for sale with Paramount Skydance Corp’s legal fight to buy Warner Bros Discovery Inc dragging on, according to people familiar with the discussions.
Bankers have approached potential buyers with the idea of acquiring New Line Cinema, a Warner Bros subsidiary that has produced films such as The Lord of the Rings series and the horror film It, according to people familiar with those overtures.
Warner Bros cable networks are also attracting interest, according to the people, who asked to not be identified because the discussions are private.
Paramount has won regulatory approval for the US$110bil Warner Bros deal from 68 jurisdictions around the globe, including the US Justice Department and the European Union.
The last regulatory hurdle is a pair of lawsuits filed by 12 Democratic-led state attorneys general and the Writers Guild trade union.
California Attorney General Rob Bonta, who has taken a lead in the states’ case, was scheduled to hold settlement talks on Monday but cancelled, citing what he said were leaks to the media about the discussions.
If the Warner Bros deal goes through, Paramount would own the largest collection of US cable-TV networks.
The company is considering offering to negotiate separate distribution agreements with cable operators for different parts of its TV empire as one way to settle the litigation, some of the people said.
Fees paid by pay-TV providers like Comcast Corp and DirecTV are a huge source of revenue for the company.
Bonta has said he wants structural changes to the deal as part of any settlement and not behavioural agreements that may be tough to enforce after the close.
“We’ve identified three markets in our complaint with respect to widespread theatrical distribution, blockbuster distribution and cable-channel licencing” Bonta said in an interview with Bloomberg TV.
“If they want to propose a structural remedy for each of those markets, we’ll listen.”
A spokesperson for Paramount declined to comment on settlement terms.
“Paramount is not aware or interested in engaging with unsolicited conjecture regarding our business,” the company said on Monday in a statement.
“As stated earlier today, we remain hopeful and stand ready to continue good faith discussions to resolve the attorney generals suit inclusive of structural remedies to move forward with our transaction.”
Paramount has previously tried to sell its BET channel. It’s also looked for strategic partners for MTV. Bidders have also weighed making an offer for the company’s Comedy Central network, according to people familiar with those discussions.
While cable channels have been losing viewers and advertisers to streaming services, they still throw off a lot of cash that Paramount views as necessary to help finance the Warner Bros acquisition.
The attorneys general argued that by owning so many channels, Paramount will hike fees to cable distributors and ultimately for consumers.
Rich Greenfield, an analyst with LightShed Partners, argued that Paramount should sell the former Turner Broadcasting channels, including TBS, TNT and CNN.
Those assets are potentially more valuable than some of the other Warner Bros networks, partly because they show sports.
The tradeoff is that cable networks are likely to sell for a lower multiple of earnings than what Paramount is paying for all of Warner Bros, making a sale less appealing, he said.
Selling CNN would also remove the regulatory concerns about an overlap in news, by not housing Paramount’s CBS and Warner Bros’ CNN under the same roof, notes Craig Huber of Huber Research Partners.
“I think it would placate a lot of the politicians if CNN was carved out and sold, so it would not be part of the new Paramount empire,” Huber said in an interview.
“Half this country doesn’t want CNN to be owned by an entity that might change the political persuasion of CNN.”
Warner Bros chief executive officer David Zaslav proposed spinning off the company’s cable channels last year, before Paramount began its pursuit of the whole business.
Zaslav said at the time that the Warner Bros networks accounted for about 25% of the viewing on its HBO Max streaming service.
Netflix Inc inked a deal to purchase the Warner Bros studios and streaming businesses alone, before dropping out in February after Paramount came back with a higher offer. — Bloomberg
