Updated Aug 13 at 11:26am ET.
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The United Kingdom Competition and Markets Authority has cleared the deal for Paramount to buy Warner Bros. Discovery. This is a major step forward because large international mergers must be approved by regulators in every major country where the companies do business.
While this removes one hurdle, the deal still faces a difficult path in the United States. A trial in California is currently scheduled for next March. For those holding the stock, this UK approval is a sign that international regulators may be less worried about the merger than those in the US, but the deal cannot close until the American legal issues are resolved.
Source: PRNewsWire
Paramount is looking for ways to settle a lawsuit from California's attorney general that is currently blocking its 110 billion dollar deal to buy Warner Bros. Discovery. One option now on the table is selling CNN. Antitrust laws are designed to prevent one company from owning too much of a market, and regulators often worry that combining two massive media players could hurt competition.
Selling CNN would be a major shift for the combined company, but it might be the only way to get the deal through. For owners of the stock, this shows how difficult the path to closing this merger has become. While selling a famous asset like CNN would help satisfy regulators, it also means the final company would have one less major brand to help it compete in the shift from cable to streaming.
Source: Reuters
Paramount CEO David Ellison is reportedly pressuring California officials to settle their antitrust lawsuit against the company's merger with Warner Bros. Discovery. Ellison told executives he would begin moving the company out of the state in October if a settlement is not reached. This is a high-stakes move to save a deal that is currently stuck in court. While the threat is dramatic, it does not change the core business facts for Warner Bros. Discovery today.
The company brought in $8.72 billion in revenue this quarter, which was lower than the $9.25 billion analysts expected. While it managed a small profit of 6 cents per share, the underlying business is shrinking. Revenue fell about 12 percent compared to last year, mostly because advertising sales dropped and the studio released fewer big hits.
The core problem remains the decline of traditional cable TV. Distribution revenue, which is the money the company gets from cable providers and streaming subscribers, barely grew as new streaming sign-ups were almost entirely canceled out by people dropping their cable packages. Cash flow also fell about 19 percent to $572 million. This is a concern because the company needs that cash to pay down its large debt pile while it waits for its streaming business to become a bigger profit engine.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
The company is scheduled to release its latest results today. Analysts expect revenue of about 9.25 billion dollars and a loss of 13 cents per share.
Beyond the raw numbers, the focus remains on how quickly the company can grow its streaming profits to offset the steady decline of its traditional cable networks. We will also be looking for any updates on the plan to pay down its large debt pile, which stood at over 33 billion dollars earlier this year.
Analysts have been cautious lately, with recent rating changes showing a mix of upgrades and downgrades. Most experts are neutral, with 12 of 32 analysts recommending a buy and the average target price suggesting an 11% upside.
The company has a choppy track record, often beating earnings estimates while missing on revenue as its traditional TV and movie businesses struggle to find a steady floor.
| Expectation | |
|---|---|
| EPS | $-0.01 |
| Revenue | $8.78B |
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