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Picture this: You have just spent $8 billion buying Paramount Pictures in August. By September, you are already eyeing another studio worth $70 billion. Most people would call this financial madness. David Ellison calls it Tuesday.
The son of Oracle billionaire Larry Ellison is reportedly preparing a cash bid for Warner Bros. Discovery – the company behind HBO, CNN, Barbie, and Harry Potter. And the market is taking notice.
Warner Bros. Discovery’s stock rocketed from $31 billion to $45 billion in market cap in the last one week. Its shares are up 71% YTD.
Why?
The surge was triggered by Wall Street Journal reports that Paramount Skydance is preparing a majority cash bid to acquire the entire company. The timing is crucial as Warner Bros. Discovery is currently planning to split into two entities by April 2026, but Paramount Skydance wants to buy the whole company before this split occurs. Investors are betting on a significant acquisition premium, especially given the interesting dynamic where a smaller company (Paramount Skydance) with an enterprise value less than half that size is attempting to acquire the much larger Warner Bros. Discovery.
The Players in This Hollywood Drama
David Ellison: The protagonist of our story, a Hollywood producer turned media mogul who dropped out of USC two decades ago to make movies like Top Gun: Maverick. Now he’s playing with much bigger toys.
Larry Ellison: David’s father and Oracle co-founder, who recently became (briefly) the world’s richest man with over $380 billion. When you need to finance a $70 billion deal, it helps when daddy has deeper pockets than most countries’ GDP.
Warner Bros. Discovery: The target company, created from a 2022 merger, appears to be struggling with massive debt ($30.7 billion in net debt) and declining traditional TV viewership.
Why This Deal Makes Sense (On Paper)
The logic is straightforward: bigger is better in the streaming wars.
Netflix has seemed to be eating everyone’s lunch for a decade, growing nearly 1,000% while traditional media companies like Warner Bros., Disney, and Paramount have largely stagnated. Netflix now commands 8.8% of US TV time, while YouTube (Google’s baby) has captured a whopping 13.4%.
Meanwhile, Warner Bros. and combined would control just 13.1% of TV market share – barely edging out YouTube as the leader. In streaming specifically? They’re practically invisible, with Warner Bros. accounting for a measly 1.4% of total TV time via streaming.
A merger would create synergies (corporate speak for “we can fire a lot of people and cut costs”) worth an estimated $3 billion. It would also combine HBO Max and Paramount+ into a streaming service that might actually have the content library and subscriber base to compete with Netflix.
The Numbers Game: Why This Might Be Expensive Fantasy
Here is where things get interesting from a financial perspective, and the math is genuinely staggering.
Warner Bros. Discovery’s market cap shot up from $31 billion on Wednesday to $47 billion by Friday’s close. Add in the company’s net debt, and you’re looking at an enterprise value of about $71 billion. Meanwhile, Paramount Skydance’s enterprise value is less than half of that – creating a David vs. Goliath scenario where the smaller company is trying to swallow the giant.
To put this in perspective, a deal would be on par with Disney’s 2019 acquisition of 21st Century Fox assets for $85 billion, including debt. That was considered massive at the time.
But here is the kicker: Bank of America thinks a takeover price could be at least $30 a share, translating to $74 billion in equity value. For Paramount Skydance, which already carries $11 billion in net debt (equivalent to 4 times its earnings before interest, taxes, depreciation, and amortization), this acquisition could push their credit ratings into junk territory and dramatically increase borrowing costs.
Warner Bros. Discovery isn’t trading at $12 for no reason. The company reported minimal 1% revenue growth in Q2, with most of its profit growth coming from cost-cutting rather than business expansion. Nearly 50% of its revenue still comes from declining traditional TV networks, while its streaming business – though profitable – is growing at just 9%.
The company trades at about 8x EV/EBITDA, which isn’t exactly screaming “undervalued.” As the stock approaches $20, the multiple climbs to 9x. For investors, this creates an asymmetric risk profile: maybe a few dollars of upside if a bid materializes, but $8 of downside if it falls back to $12.
There’s also the execution nightmare of merging not two, but three of the biggest media companies in the US simultaneously.
The Obstacles Are Real (And Numerous)
The Size Problem: Paramount Skydance has an enterprise value of about $35 billion, trying to swallow a $71 billion target. It’s like a minnow attempting to eat a whale.
Debt Mountain: Paramount Skydance already carries $11 billion in net debt (4x its EBITDA). Adding Warner Bros.’ $30.7 billion debt pile would create a leverage situation that could push the combined entity’s credit rating into junk territory.
Regulatory Maze: The Paramount-Skydance deal itself took 13 months to close, and that was the easy part. A Warner Bros. acquisition could face intense regulatory scrutiny, especially given the Trump administration’s focus on media companies.
Integration Nightmare: Merging three major media companies simultaneously isn’t just complicated – it’s potentially catastrophic. While management focuses on integration, competitors like Netflix continue building their businesses.
The Political Subplot
This is just not a business story – it appears to be political.
Larry Ellison is Trump-friendly, and the timing may not be coincidental. Skydance only got regulatory approval for Paramount after agreeing to eliminate diversity programs, appoint a CBS News ombudsman, and settle Trump’s lawsuit over a Kamala Harris interview for $16 million.
With Trump back in the White House, the Ellisons seem to be moving while the political winds blow in their favor. The effects are already visible at CBS News, where a former conservative think tank leader was appointed as ombudsman, and Bari Weiss (center-right, pro-Israel journalist) is expected to have influence after Ellison buys her digital media startup, The Free Press.
But here’s the strategic twist: Ellison’s bid for the entire Warner Bros. Discovery could be a preemptive strike. Warner Bros. CEO David Zaslav was planning to split the company in mid-2026 – streaming/studios in one entity, declining TV networks in another. This split was designed to make the valuable streaming assets more attractive to buyers like Apple or Amazon, who wouldn’t want the baggage of dying cable networks.
By bidding for everything now, Ellison could prevent other tech giants from cherry-picking the good parts. It might also block competitors who might be on Trump’s bad side – like Comcast’s Brian Roberts, who owns MSNBC and has been the target of disparaging Trump posts. A regulatory review involving a “Trump enemy” would likely face much tougher scrutiny.
This window might not stay open forever, and Ellison knows it.
The Bigger Picture: Hollywood’s Consolidation Game
This potential merger reflects a broader truth about the entertainment industry: the middle may be disappearing. You’re either Netflix with global scale and deep pockets, or you may struggle to stay relevant.
The rise of YouTube, TikTok, and streaming has fundamentally changed how people consume content. Traditional TV networks are becoming obsolete, theatrical releases matter less, and content libraries need to be massive to compete.
Warner Bros. itself has been involved in some of the most disastrous deals in corporate history – AT&T’s doomed purchase of Time Warner, and before that, the catastrophic AOL merger. The company is currently on a box-office hot streak, but that came after years of CEO David Zaslav taking heat for killing projects like “Batgirl.”
What’s particularly interesting is that this isn’t the Silicon Valley takeover of Hollywood that many predicted. Analysts long assumed Apple would eventually buy a major studio, maybe even Disney. But instead of the clean tech acquisition many expected, we’re getting an Oracle billionaire’s son buying studios one after the other – definitely not the Silicon Valley roll-up people anticipated, but maybe the one we’re actually getting.
The ripple effects would be massive: more mass layoffs in an already struggling industry, fewer suppliers of blockbuster content for movie theaters, and the consolidation of two major streaming services into one potentially viable Netflix competitor.
The Verdict: Fascinating but Questionable Investment?
For investors who bought Warner Bros. Discovery at $12, congratulations – you have made a quick 50%. For those considering buying now at $19+, the risk-reward equation looks less appealing.
The fundamental business hasn’t changed. Warner Bros. Discovery still has massive debt, limited growth potential, and operates in a brutally competitive industry. A potential acquisition might provide an exit at $20-25, but if the deal falls through, that $12 floor looks very real.
For the broader industry, this represents another chapter in the ongoing consolidation story. Whether it’s good for consumers, employees, or content quality remains to be seen. But one thing’s certain: when billionaires start playing Monopoly with Hollywood studios, the rest of us should pay attention.
The next few months will reveal whether this is visionary dealmaking or expensive empire-building. Either way, it’s going to be one hell of a show.
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