Paramount-Warner Deal to Face Regulatory, Financing Hurdles (1)

David Ellison spent two years trying to get his arms around Paramount Global before finally sealing an $8 billion takeover of that iconic Hollywood studio.

Now, the son of Oracle Corp. co-founder Larry Ellison is after a bigger prize, the $71 billion Warner Bros. Discovery Inc. If the past few years of tumult in the media industry are a guide, his newly created Paramount Skydance Corp. will face a tortuous path to completing a deal.

A merger of the two would shrink Hollywood’s major legacy studios to four and unite some of the biggest names in news, movies and TV, inviting regulatory scrutiny. A deal will also face financial, operational and investor hurdles, as well as possible interference from President Donald Trump, a frequent target of Paramount’s South Park show this year.

“I don’t know if the government will allow this,” said Raymond Sfeir, director of the Anderson Center for Economic Research at Chapman University in Orange, California. “It’s already a very concentrated industry to start with, and now you’ll have even more concentration. There will be less competition for streaming. When there is less competition, prices will increase over time.”

The two companies overlap in a variety of areas: film and TV production, news and cable networks. Paramount owns CBS News, MTV and Nickelodeon, in addition to its movie and TV studio. Warner Bros. is the parent of HBO, CNN and the Cartoon Network, along with its studio — which is one of the biggest.

A combination of “Warnermount” could generate as much as $4.5 billion in cost savings, according to Benchmark Co. analyst Matthew Harrigan. Warner Bros. shares rose 17% on Friday following a 29% gain the day before. Paramount climbed 7.6%.

Both companies are also in the midst of major transformations meant to deliver higher returns to investors. Paramount just completed the merger with Ellison’s Skydance Media last month, and is poised to cut up to 2,000 jobs.

Read More: A Paramount-Warner Bros. Combo Would Add to LA Job Market Woes

Warner Bros. is about to split in two — with one part owning its streaming and studio operations and the other home to cable channels like TNT. A combination with Paramount, or any other media company, would almost certainly lead to thousands more firings through consolidation of businesses like their competing streaming services: Paramount+ and HBO Max.

Warner Bros. Chief Executive Officer David Zaslav believes his studio and streaming operation will trade at a big premium to the current company once separated from the debt-heavy cable networks. He aims to complete that split by April.

Ellison’s mostly cash bid will have to be big enough to convince Zaslav to abandon the split. Warner Bros.’ current equity market value is $40 billion, boosted by a 29% gain Thursday when Ellison’s interest became known. Including net debt, the company is worth about $71 billion. Its credit rating was cut to junk earlier this year.

“Such a deal would need to be meaningfully better than what (Warner Bros.) thought the post-spin company was worth,” KeyBanc analyst Brandon Nispel wrote in a research note.

Ellison has deep pockets. His father is the world’s second-richest person, with a fortune of $363 billion, according to the Bloomberg Billionaires Index, and the Warner Bros. bid has backing from the Ellison family.

Owners of both companies’ debt will have a say.

A deal could lower Paramount’s credit ratings, raising its borrowing costs. Bond graders are skeptical of the pay-TV industry, research firm CreditSights wrote Thursday, and Paramount’s debt pile relative to its earnings is already higher than the blue-chip companies.

A one-notch downgrade from Fitch Ratings or Moody’s Ratings would trigger the firm and its nearly $16 billion of total debt to fall into junk territory.

For Warner Bros. bondholders, many of whom felt spurned after the company bought back some of its notes and stripped key safeguards from others in preparation for a split, one major risk is that the deal is announced but later blocked. The bonds traded higher on Thursday.

Ellison could also face resistance from Zaslav, who previously served as CEO of Discovery Communications and oversaw the merger of Discovery with WarnerMedia in 2022. He plans to stay on as CEO of Warner Bros. after the cable networks are divested, overseeing the studio business and the HBO Max streaming platform.

Paramount may only be interested in the Warner Bros. businesses and not in the cable networks, Kenneth Leon, director of industry and equity research at CFRA Research, wrote in an analyst note.

Paramount may “not see meaningful value creation from the Discovery Global media portfolio,” Leon wrote.

Both companies have drawn attacks from President Trump, who has shown he’s willing to use the levers of government against his perceived enemies.

Trump sued Paramount a year ago, alleging CBS News had engaged in election interference by editing an interview with then-Vice President Kamala Harris to appear more flattering. He reached a $16 million settlement with Paramount in July, Paramount’s new owners agreed to changes at CBS News, including hiring an ombudsman to review complaints of bias.

Trump routinely calls CNN “Fake News CNN” and previously the “Clinton News Network.”

If a deal were to go through, Paramount would add Warner Bros.’s struggles to its own. Both companies wrote down the value of their cable networks by billions of dollars last year as more TV viewers cut the cord and switch to streaming.

And both companies have cut thousands of jobs as they cope with a deep retrenchment in the film and TV industry.

US film and TV production fell 35% last year from the peak in 2022, according to industry tracker ProdPro, and has dropped a further 12% in the first half of 2025.

(Adds cost savings estimate, shares trading in sixth paragraph.)

--With assistance from Ethan M Steinberg.

To contact the reporter on this story:
Hannah Miller in New York at hmiller129@bloomberg.net

To contact the editors responsible for this story:
Christopher Palmeri at cpalmeri1@bloomberg.net

Rob Golum

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