Comcast said its Warner Bros. bid stayed limited because it refused to overextend financially and saw little chance of being chosen.
- Cavanagh said Comcast kept its proposal cash-light to avoid stretching the company’s balance sheet.
- Warner’s board favored offers with higher cash certainty and different deal structures, he said.
- Comcast said it left the process more confident in its existing NBCUniversal strategy.
Comcast Corp. (CMSA) said it did not expect to have a “high likelihood” of winning its proposed combination with Warner Bros. (WBD), which shaped its decision not to push harder for a transaction.
Speaking at the UBS Global Media and Communications Conference, Comcast President Mike Cavanagh said the company reassessed its position after Warner Bros. “flipped” its original plan for the future of the business. He said Comcast had been “heads down” executing its own strategy at NBCUniversal but felt it had an obligation to evaluate the shifting situation around Warner Bros.
Cavanagh said the company debated internally “whether to bother or not” with a proposal, given the potential disruption and distraction, but decided it was “our job” to examine the opportunity and see “where it leads.”
Limitations Of Comcast’s Bid
Cavanagh said Comcast’s thinking was driven by a firm decision not to overextend its finances. He said Comcast was “not interested in stressing the Comcast balance sheet to any stressful level” as part of a Warner Bros. deal.
As a result, Cavanagh said Comcast’s proposal was “light… on cash” compared with other offers. The company instead put forward a structure that offered Warner Bros. shareholders a significant equity stake in a combined entertainment company.
Under Comcast’s proposal, NBCUniversal’s Parks, Media and Studios would have been combined with Warner Bros.’ Studio and Streaming segment. Warner Bros. shareholders would have received a “substantial percentage” of the new entity, which Cavanagh said would have been a publicly traded, controlled subsidiary of Comcast.
Cavanagh said that structure “made sense to us for us,” given Comcast’s confidence in its existing strategy and its decision to move ahead without cable networks in the future.
Warner Board’s Preference For Cash-Rich Offers
Cavanagh said Comcast ultimately understood why Warner Bros.’ board chose other suitors. He said the board preferred “the certainty of high levels of cash or collared stock” rather than the level of equity and financial structure Comcast was prepared to offer.
He said Comcast “respects and understands” the Warner Bros. board’s decision and added that the process left Comcast more confident in its own path. Cavanagh said the company “walked away feeling great about our business and our strategies” after going through what he described as a “reverse due diligence exercise.”
He said Comcast’s management team came out of the process believing it is better positioned by staying focused on its existing plans for NBCUniversal’s Parks, Studios and Media, including Peacock.
The Broader Battle For Warner
Comcast’s comments came as Paramount (PSKY) launched a $77.9 billion hostile tender offer for Warner Bros. Discovery, days after Warner agreed to sell its studio and HBO Max streaming business to Netflix (NLFX) in a separate cash-and-stock deal.
Paramount is offering $30 a share in cash for all of Warner, arguing its bid is more attractive and more likely to gain regulatory approval than Netflix’s agreed transaction. The company said its proposal provides about $18 billion more in cash than the Netflix consideration.
Paramount has also accused Warner of not meaningfully engaging with its prior proposals and is now taking its latest offer directly to shareholders via a tender.
Netflix agreed to pay $72 billion, or $27.75 a share, for Warner’s studio and HBO Max streaming business after Warner splits in two. Its deal includes a $5.8 billion breakup fee, signaling its confidence that regulators will approve the transaction.
Stocktwits Traders Lean Bullish Across Media Giants
On Stocktwits, sentiment for CMCSA was ‘bullish’ amid ‘high’ message volume, while WBD, PSKY and NFLX all saw ‘extremely bullish’ sentiment alongside ‘extremely high’ message volume.
So far this year, CMCSA is down 26%, while NFLX is up 8%, WBD has surged 155% and PSKY has gained 41%.
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