Paramount与WBD并购案达成和解，交易有望9月30日前完成

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Listen on demand wherever you get your podcasts or watch us live on YouTube. We want to get to one of the big company news stories this morning and that is Paramount Sky Dance reaching a settlement according to people familiar with the matter with California and other states suing to block its proposed acquisition of Warner Brothers Discovery. That means we need to bring in Githa Rangothan, our uh media analyst here at Bloomberg Intelligence to cover this.

She's been covering this story from the beginning. Githa, this sounds like this was the one thing we're waiting for. What are you hearing in terms of uh how how solid this uh potential compromise is?

Hey, Scarlet. Yeah, I think it's it's pretty solid just from uh you know, whatever whatever we've been hearing over the weekend. So, we've kind of gone from you know, is this deal ever going to close to kind of broader promises to to now some concessions that seem really really reasonable from a Paramount standpoint. And I say that because one of the things that you know I think investors were really fearful about with this merger and the potential settlement was whether they would have to divest assets especially whether they would have to divest the cable networks which which would have been a really uh you know problematic because it would directly have affected their synergy target and they have a really ambitious synergy target of $6 billion.

So it looks like they don't have to do anything on that front. They do however have to promise to to uh theatrically release 30 films from both studios every year failing which there will be a penalty. Uh they also have to make an investment in you know the California production uh and also maintain the two studio operations. So, they can't dispose of any of the studios. But all of that seems to be something that David Ellison will be, I think, happy to live with as long as he can get this deal closed by that September 30th date and avoid those very, very expensive ticking fees.

Paramount stock is up about uh 8 and a half% today. Warner Brothers Discovery up about 10%. So, the market's happy about that. All right, Githa. I think this is a little bit of be careful what you wish for. They're going to get their deal done now. They got to operate this thing. What are the key challenges do you think for this combined company going forward?

Yeah, the biggest challenge there, Paul, is definitely going to be the leverage, the debt. So, we're looking at about $80 billion of debt. It's going to be about 6 and a half times levered. So, it's really really going to come down as you just pointed out to execution about getting those synergies and trying to drive this to three times leverage within a few years after closing. That's a tall order given that you know you have two businesses that are in uh secular decline which are the TV businesses.

Yes, they can extract some synergies but you're doing that at the cost of those businesses bleeding further and then remember the studios is really a very very up and down business and you've always said this Paul it's like it's such a hit and hit or miss business. It's not predictable at all. So you just look at the two combined studios last year they had about a 30% share of the domestic box office. This year year to date they're only at about 10%.

So, you know, it's it's again, it's going to be a tough slog on that on that front. Streaming is is definitely a bright spot for both companies, but again, we're we're seeing even streaming leaders really struggle. You look at the likes of Netflix, and you know, every day we see some engagement data that comes out that doesn't look so optimistic, really struggling against the likes of YouTube and some of the other social media platforms.

So whichever way you kind of slice or dice it, this is really going to be a tough road ahead for Paramount's guidance.

Yeah, the company Paramount has promised merger synergies of six billion. So that means a lot of cost cuts, probably job eliminations. Um and you mentioned all the challenges um operationally if they're going to grow their way out of this debt. Um what part of the business has the best prospects for growth?

Yeah, definitely. Streaming I think has the best prospects? But remember this is at its heart David Ellison and you know the whole Oracle backing at its heart is a technology operation. So I think one of the things that the market and investors are kind of banking on is the use of technology uh in the media operations you know whether that's for content you know content creation content production uh eliminating a lot of those post-p production costs I mean I mean they do have a seat at the table when it comes to AI and so it's going to come down to how well they can kind of leverage some of the the edge that they have there uh and implement those across their media operations but I think definitely one of the one of the business units that everybody's going to be looking at very closely is going to be the streaming side and how much you know how fast they can go profitability even though 70% Scarlet the combined company 70% of EBA will still be from the secularly challenged TV businesses

30 seconds left here Githa what's the Wall Street's view of David Ellison he's kind of a new entity to Wall Street has there been enough time for the street to get a sense of is this the management management team that can execute this I think they can uh Paul and actually whatever we've seen so far, he's actually uh been pretty impressive because he's more than delivered on the synergy targets for the Sky Dance acquisition.

Remember this was this is Paramount Sky Dance. They just executed that transaction and so far he's he's actually more than delivered what he had promised. So let's see.

Stay with us. More from Boomer Intelligence coming up after this. You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App.

Listen on demand wherever you get your podcast or watch us live on YouTube.

Edward Price joins us here, non resident senior fellow at NYU joining us here in studio. Ed, I've been getting the sneaky feeling that with President Trump in New York for a couple of days, with the United Nations General Assembly here this week, we've got leaders from Iran coming, which is very rare there. Granted, some some visas. We've got President Zalinsky here. For some reason, it's just me. I'm getting this feeling that we might have some announcements this week on maybe Ukraine, Ukraine, maybe Iran.

Maybe President Trump is feeling the the pressure with midterms coming up with diesel at 650. Am I just kind of whistling in the dark here or do you think there's possibly some movement here on some of these key global issues?

I don't think you're whistling in the dark. There might be some rhetorical movement and I definitely think that Trump is desperate. I mean, Diesel at 650 at my local gas station is wild. I mean, that's that's fritting everybody's brain that voted for him. Um, but I but I use the word rhetorical because I'm not sure that he is in control of events anymore. Um, Zalinski seems more in control of his war than than does Trump.

Um, likewise, she seems like he's in a good position versus Putin. So, I think Trump and Putin, both of them are desperate. Uh, and whatever the announcements, I mean, who knows what they're worth.

So, if you say Trump is desperate, he's heading into this summit with Xi Jinping in a more desperate position than China.

What kind of prepackaged announcement do you think we'll get um versus what actually will be happening between these two gentlemen? Well, what's a

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