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According to a report from Axios, Warner Bros. Discovery CEO David Zaslav (WBD) met with Paramount Global CEO Bob Bakish (PARA) on Tuesday about a potential merger between the two media giants. Zaslav has also spoken to Shari Redstone, who owns Paramount's parent company, about a potential deal. It was widely expected that Paramount may do some sort of deal, with Wells Fargo upgrading the company's shares on Wednesday on that prospect.
William Cohan, Puck News Founding Partner, joins Yahoo Finance to discuss what a potential deal would look like between both companies and what the aftermath might look like. Cohan says if the two companies were to merge, they would create a "behemoth with an awful lot of debt. There's no question about it"
In terms of how easy or difficult it might be for a deal Cohan says: "It wouldn't be hard for, say, Apple (AAPL) to buy Paramount. It would be a chip shot. For Warner Bros. Discovery, with its $43 billion in debt, and Paramount's $15 billion in debt, and the overlap in terms of business lines, it's going to be difficult, strategically and regulatorily, to get this through. But David Zaslav is nothing if not ambitious. He clearly doesn't think he's done yet in Hollywood. He wants more in Hollywood."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
DIANE KING HALL: And speaking of just the issues with regard to this deal, one of the concerns could certainly be the debt levels for WBD. That's-- they've been dealing with their debt levels and kind of addressing that issue. But how could this deal be structured? Like, where does the financing-- I mean, I suppose it would be some creative financing-- to come from to support this deal?
WILLIAM COHAN: Yeah. So it's a great point. You know, David Zaslav has paid down around $12 billion of debt, going from 55 to about 43 of net debt. Good for him. Paramount has $14 billion of net debt, 15 minus 1 billion in cash. Combining those two-- and they're both sort of on the BBB cliff in terms of credit ratings. Combining the two might push them both over the cliff and result in downgrades and debt that could be immediately redeemable and cause all sorts of problems.
On the other hand, maybe by April of 2024, the debt markets would have thought a little bit. The interest rate that the Fed raising, that the Fed has suggested it's going to cool off might have cooled off by then. Maybe the capital markets would be open and stronger than they have been recently. And maybe there's a Wall Street would come along and try to refinance all that or what parts that needed to be refinanced.