How far can Warner push the Ellisons above $70 bn?

YOU MIGHT HAVE thought the tortuous acquisition of Paramount Global would have put David Ellison off dealmaking at least for a few months.

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But the movie producer—backed by his billionaire father, Larry, the co-founder of Oracle—has only gained more ambition. His enlarged Paramount Skydance media business is considering an audacious bid for larger rival Warner Bros Discovery. The challenge for Warner's CEO, David Zaslav, is finding levers to push the wealthy Ellisons to their pain threshold—wherever that may be. A tie-up makes sense. Both companies face the same core challenges: managing the decline of traditional cable television and becoming more competitive in streaming given the relentless march of Netflix.

The main benefit of merging Paramount with the smaller Skydance was the financial stability that came with control passing to the Ellisons. The hard synergy potential was limited. As for Warner, it faced its challenges head-on this year by announcing a plan to spin off its cable channels, sending a large chunk of debt with them. This frees up the streaming and studio business to command a higher stock price befitting its growth prospects. But there are limits to the value that can be created for shareholders from break-ups, which just move assets into different legal structures.