RPT-BREAKINGVIEWS-David Zaslav’s ego finally plays useful WBD role

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Saba

NEW YORK, Dec 10 (Reuters Breakingviews) - David Zaslav finally landed himself a suitable role in Hollywood: brazen dealmaker. Warner Bros Discovery's WBD.O boss sparked a bidding war for the entertainment empire by stringing along the rich and powerful Ellison family. His latest antics will help reclaim some of the value he destroyed while being lavishly paid.

The Warner Bros auction process has been wild already and is due to get wilder. After Paramount PSKY.O made the company a takeover target, Zaslav agreed to sell its storied studio and HBO streaming service to Netflix NFLX.O for $83 billion in cash and stock. Paramount then took its all-cash $108 billion offer, including debt, directly to shareholders.

Based on Paramount's recap of the proceedings, Zaslav acted arrogantly. David Ellison, the newly minted media mogul, first approached WBD in September with a $19-a-share offer, after the company unveiled plans to cleave its cable networks from the rest of the business.

Ellison aggressively courted Zaslav over lunches and meetings, some of which included his father, Oracle ORCL.N founder Larry Ellison, who is backing the deal. At various turns, Zaslav insisted on a two-year standstill agreement and that Paramount obtain his permission before seeking financing. Ellison went so far as to offer him positions as co-CEO and co-chairman of the combined company. Zaslav ghosted Ellison, who was pleading with him by text message, and after his advisers intimated that “cash was king” accepted Netflix stock as partial payment.

The audacity eventually squeezed $27.75 a share, excluding CNN and other channels, from the streaming titan and $30 from Paramount for the whole company. WBD’s stock had been lingering around $12 for much of the year, thanks to Zaslav's clumsy performance as a buyer.

Although he successfully clawed back $1.2 billion from Warner Bros' previous owner, AT&T, after accusing it of making questionable financial projections, according to the New York Times, Zaslav presided over a disaster. He larded Discovery with $50 billion in debt, botched the branding of HBO, and mismanaged CNN. Even with a 150% takeover premium, WBD's minus 4% total return has badly lagged the broader market and Netflix from the time it announced the merger in May 2021.

Since becoming Discovery's CEO in 2006, Zaslav has collected consistently tidy sums — nearly $900 million in salary and bonuses by one accounting — for his unsteady leadership. He wrangled another tranche of options for himself that vest no matter which transaction prevails. If it's Netflix, he could net some $400 million, per Bloomberg. It looks increasingly likely that he might even bag a few dollars more for the company, a development that would both benefit shareholders and further stroke Zaslav's ego.

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CONTEXT NEWS

Paramount Skydance said on December 8 that it had initiated a $30-a-share, all-cash tender offer to buy the entirety of rival Warner Bros Discovery, including its cable TV networks, arguing that it is a better deal for the company’s shareholders than the company's agreed sale of its film studio and HBO streaming service to Netflix.

(Editing by Jeffrey Goldfarb; Production by Maya Nandhini)

((jennifer.saba@thomsonreuters.com; Reuters Messaging: jennifer.saba.thomsonreuters.com@reuters.net))