WBD’s David Zaslav, Gunnar Wiedenfels Break Down Split That Will See Standalone Companies “Free And Clear” For M&A
Gunnar Wiedenfels is getting his own company to run. It will soon be open season for media M&A. Discovery+ and HBO Max are going their separate ways.
Those are a few takeaways from Warner Bros Discovery’s plan to split announced Monday. Shares initially popped about 9% on the news — which, in fact, is aimed in large part at pulling the stock out of a three-year funk. But they’re down almost 3% in afternoon trading. “Valuation is dependent various factors that are currently unknown,” said BofA Securities, although the firm has a ‘buy’ rating on the company and is upbeat on the deal.
Commenting on the news at a panel at Banff, Keith LeGoy, chairman of Sony Pictures Television, called it “good for the health of our business as a whole for these things to get figured out.”
The WBD split is “probably happening a little quicker than people thought was going to be the case. But now it’s out there, and I think indicative of continuing change, continuing transformation that’s going on in our business,” he said.
Like Comcast before it, WBD is splitting its high-potential Streaming & Studios business from declining but hardworking Global Networks. CEO David Zaslav will run the former, his CFO and longtime top lieutenant Wiedenfels the latter.
“Now we are focused on the next phase of transformation,” said Zaslav as the two hopped on a call with analysts to discuss how the split – anticipated to close by mid-2026 — will proceed, first ticking off steps in a complex integration they say they’ve achieved in order to get to this point. That includes retooling HBO and expanding it internationally; cutting $5 billion in non-content costs; and imposing greater discipline on the film studio, which has been having a great run recently under Michael De Luca and Pam Abdy. DC is about to release Superman.
Zaslav, however, downplayed that side of the business, calling it “the smallest part” and “hit driven” compared with a reliably massive TV studio that cranks out series across the industry and has a library that throws off cash.
After what feels like endless trial and error, Discovery+ will land firmly within Global Networks. Some Discovery content may appear on HBO Max through commercial agreements, but that’s TBD.
Another “Bold Choice”
Zaslav-run Discovery acquired WarnerMedia from AT&T just more than three years ago, a deal that left the combined company with $40 billion in debt. It’s paid down $19 billion so far. What’s left will reside mostly with the cable network company after the split.
“It’s safe to assume that the majority of the debt will live with Global Networks, and a smaller but not insignificant portion with Streaming & Studios,” Wiedenfels said. The precise capital structure hasn’t been set.
The tax-free transactions also calls for WBD to launch a tender offer — which it announced in tandem with the split — for a big chunk of debt using a $17.5 billion bridge loan from J.P. Morgan. That clears out some short-term maturities and can make the process palatable to bondholders. WBD will repay the loan at separation by issuing new debt from each company. Analysts pressed a bit but the execs said it’s too early to give specific numbers of how that will be split.
“It’s a great way to do this. It will go over great with bondholders. It’s a very fair offer,” Wiedenfels said. He thinks shareholders will also like it. The key, he stressed, is that both companies will “have a clear path to de-leveraging” though anticipated strong cash flow and strong liquidity from that cash as well from as available revolving credit facilities.
Global Networks will also retain a nice nest egg in the form of a 20% stake in Streaming & Studios “that it will plan to monetize in a tax-efficient manner to enhance the de-leveraging of its balance sheet” – meaning it can cash in that holding when it needs to.
“After a complex integration process, through hard work, we now have networks with an unrivaled global footprint,” summed up Zaslav. “We now have deals completed with all of the top six pay TV distributors.” On the other side, “With HBO Max, we have rebuilt, relaunched and dramatically repositioned our streaming offering in about 80 markets.” He reiterated plans to top 150 million subscribers by the end of 2026 and hit $1.3. billion in direct-to-consume profit this year.
When Discovery made its hugely ambitious move back in 2022, he said, “What we found was largely a domestic streaming service that lacked scale [and was] losing more than $2 billion.”
Now, “the companies have the resources, culture and talent to effectively compete independently. Three years later, it is again time to make a bold choice.”
The split “reflects our belief that each company can now go further and faster apart than they can together,” the CEO added.
Ultimately, most pundits think the end game is likely a deal for one or both. Wiedenfels said both companies will be “free and clear” for M&A the second the split is complete, with no waiting period.
Comcast in November announced plans to split its media portfolio into a separate company called Versant in a spinoff it expects to close by year end. With Lionsgate Studios now split from Starz and some other hanging chads, the M&A landscape could soon heat up dramatically. Charter recently announced plans to merge with Cox in a major deal.
Wall Street has been speculating about a cable network rollup since that Comcast announcement, one that could see Versant and the yet unnamed WBD cable company hooking up, or private equity coming in, or both.
For WBD’s two stand-alone companies, said Wiedenfels, “there are likely to be different investors, because they have different growth metrics and different trajectories.”
Peter White contributed to this report
