WBD exploring separation of linear and D2C businesses to boost stock – reports
Warner Bros Discovery (WBD) is reportedly weighing up several strategic options, including splitting its direct-to-consumer and studios businesses from its linear networks, as it looks to improve its languishing stock price, according to the UK’s Financial Times (FT).
David Zaslav
The publication reported last week that WBD president and CEO David Zaslav was examining various options but had not yet officially hired investment bankers to begin exploring any one deal structure or transaction.
Under a potential plan to separate its studio/streamer from its linear business, WBD would move SVoD service Max and Warner Bros movie studio into a separate entity while leaving its declining but still profitable networks business as a standalone outfit, said the FT. WBD’s US$39bn of debt would reside with the latter business, with the former freed up to invest in growth without debt constraints.
WBD is also exploring the sale of assets, according to the FT.
Zaslav has been under growing pressure as WBD’s share price has continued to slide this year, falling by around 65% since it launched out of the merger of WarnerMedia and Discovery in April 2022.
The company had hoped for a turnaround in 2024 but that has not materialised, with the stock dropping from US$11.66 per share at the turn of the year to a low of less than US$7 last month.
Over the past week, the share price has risen, prompted initially by an analyst report by Bank of America (BofA) and then the FT’s article.
BofA analyst Jessica Reif Ehrlich said WBD “is not working” and suggested it should explore asset sales or selling itself.
“At current levels, we argue that exploring strategic alternatives such as asset sales, restructuring and/or mergers would create more shareholder value versus the status quo,” she said.
Since taking over, Zaslav and his team have enacted several rounds of mass lay-offs, with thousands of employees exiting the business over the past two years as it has prioritised cost-cutting.
Word of the most recent round of lay-offs came last week, with almost 1,000 roles set to be cut.
Under the WarnerMedia/Discovery deal, WBD was prohibited from being involved in any major M&A activity for two years, but that deadline passed in April.
WBD is set to report its second-quarter earnings on August 7, at which point Zaslav will likely be pressed by analysts on the merits of various deal permutations.
