The history of media mergers is filled with broken promises of deleveraging, and sources who talked to 9fin this week are not confident Paramount Skydance’s acquisition of Warner Bros Discovery will break the mold.
Media companies have a track record of promising lofty cost cuts and synergies, only for the actual execution to fall short of expectations before the company or its assets are sold, chopped up, merged and rearranged into a new media product.
Indeed, this is the tale the newly combined company that will be simply named Skydance is inheriting with WBD, which was owned by AOLin the 2000s, AT&T in the 2010s, and most recently came up short with its latest deleveraging plans when it combined with Discovery back in 2021 — necessitating this latest combination with Paramount.
The new Skydance capstack will put net debt at $82.5bn, and with $12.7bn of combined adjusted EBITDA generation, the unsynergized leverage ratio sits at 6.5x post-close. The company is marketing the deal on $6bn of synergies to be achieved within three years, which would raise EBITDA to $18.7bn and drop net leverage to around 4.4x. The company is targeting long-term leverage of 3x.
Source: 9fin
Some sources...
