What is John Malone doing? One of Wall Street’s and Hollywood’s longest-running parlor games is at play again in a media mogul’s notable portfolio change move.
His ability to lay low until a deal was made earned him the nickname “Swamp Crocodile.” Observers say it’s time for the 83-year-old to clarify ownership, simplify, optimize and iron out unfinished business. This is especially true given that the incoming Trump administration is expected to clear regulatory hurdles and usher in a volatile period of M&A and deal opportunities within Hollywood.
Malone is expected to release some hints about his plans this week. Mr. Malone will attend the Paley Paley International Council Summit on Nov. 12, then speak at Liberty Media’s annual investor conference, which usually draws a large Wall Street crowd, on Nov. 14. In New York.
In 2019, he sold his remaining stake in Lionsgate. In 2021, as Discovery’s majority shareholder, he agreed to a mega deal to create Warner Bros. Discovery, after AT&T spun out WarnerMedia assets under the direction of Discovery chief David Zaslav. The transaction closed in April 2022. In July 2023, Liberty Media completed the divestiture of Atlanta Braves Holdings, and subsequently this summer, Malone transferred the voting power of a significant amount of his stock to Braves Chairman and CEO Terry. -Delegated to Mr. McGuirk. A few months later, Liberty proposed a combination of Liberty SiriusXM tracking stock and satellite radio giant SiriusXM, but the company closed the deal in September of this year.
But while Warner Bros. Discovery may be at the center of the unfinished business, the company has not lived up to its investors’ promise of being a pure entertainment studio. Malone, a WBD shareholder and director, may be able to make that decision after Zaslav opened the door to further mergers with a test balloon in a Nov. 7 post-earnings conference call with analysts. I don’t know. Malone has spoken in the past about “free radicals,” referring to small and medium-sized media companies that must explore consolidation options to gain scale. However, experts are divided on whether WBD will be a buyer or a seller given its debt burden.
In late 2023, Guggenheim Securities analyst Michael Morris suggested in a report that WBD may consider acquiring a company with an existing NFL broadcast contract, saying, “Fox or Paramount Group are the most likely. “This is a likely target.” And in fact, according to regulatory filings in early November, Warners was in talks with Paramount Global about a potential partnership before David Ellison and Skydance Media struck a deal to take over Shari Redstone’s empire. We discussed.
“While I don’t think Mr. Malone will push this forward in the short term, it seems like WBD will inevitably be sold or broken up,” said Jeff Brodarczak, an analyst at Pivotal Research Group. .
Robert Routh, an analyst at FBN Securities, said of the potential dissolution that Malone “wanted to separate DC Comics into a separate entity, either through a tracking stock or a regular IPO, to highlight the true value of the WBD library.” They may request that the company be listed on the stock market.” Because that’s the easiest way. ”
Or there’s CNN, which Bank of America suggested in a July report that it could be worth about $6 billion on the market. Alternatively, Warner Games, home of Hogwarts Legacy, could be spun off for about $5.6 billion. Less valuable: Linear TV brands like TNT and TBS have been a drag on the company’s bottom line in recent years.
Analyst Craig Moffett, who spoke with Mr. Malone before he issued his own guidance on his next move in late September, said in a research note that Mr. Malone has no plans to sell or spin off part of WBD. said he believed he felt “maybe unattractive, but.” That would probably be the tracking business. ” Malone explained that “from a financing perspective, you could argue for a tracking stock that delivers a linear business,” Moffett wrote. “Then they essentially have a growth side and a cash cow side, and they can allocate a lot of debt to that side, and maybe even attract private equity to that side. , would be able to isolate the studio without passing taxes,” and the growing part of the business. The multiple would probably be even higher, he suggested. ”
In addition to Warner, Mr. Malone is also involved in the merger of Charter Communications, the second-largest cable operator in the U.S., and Liberty Broadband, which owns a large stake in the cable giant along with GCI, Alaska’s largest communications provider. I’m looking for. Liberty Broadband announced on September 23 that Charter had sent it an initial merger proposal and that it had responded with a counter-proposal.
Importantly, Liberty emphasized that all stock transactions are “intended to be tax-free.” After all, as the old saying goes, the only things that are certain are death and taxes, and Mr. Malone has a reputation for always focusing on deal structures that avoid taxes.
Those who have been following Malone for years think his latest trade is a logical step. He calls this his own game of checkers, placing his pieces and waiting for the right opportunity to strike a deal that suits him. Routh added: “I think he’s planning and simplifying his empire as he gets older because there’s too much value in this complex to maintain.”
Mr. Malone’s near-term focus is expected to be on finalizing a charter deal, and observers on the street predict a final structure will be worked out that appears to be win-win. His strategy could open up more trading options. “It will also eliminate companies with five classes of shares and create companies with a single class of shares, making it easier for other companies to acquire them,” Routh stressed.
