What is John Malone up to? One of the long-running parlor games on Wall Street and in Hollywood is afoot again amid the media mogul’s noticeable portfolio-changing moves.
His knack for lying low until a deal comes to him earned him the nickname “swamp alligator,” and observers see this as the time for the 83-year-old to clarify, simplify and optimize ownership stakes and settle unfinished business. All the more so given the incoming Trump administration is expected to sweep away regulatory hurdles and usher in a volatile period of M&A and dealmaking opportunities within Hollywood.
This week Malone is expected to drop a few hints about his plans: He’s appearing at a Paley Paley International Council Summit on Nov. 12, then on Nov. 14 will make remarks at Liberty Media’s annual investor meeting that always draws a big Wall Street crowd in New York.
In 2019, he sold his remaining stake in Lionsgate. In 2021, as a big Discovery shareholder, he agreed to the mega-deal that created Warner Bros. Discovery, which was completed in April 2022 after AT&T spun out WarnerMedia assets under the leadership of Discovery chief David Zaslav. In July 2023, Liberty Media completed the split-off of Atlanta Braves Holdings, followed this summer by Malone transferring proxy rights to vote a big stake he owns to Braves chairman and CEO Terry McGuirk. Months later, Liberty proposed a combination of its Liberty SiriusXM tracking stock with satellite radio giant Sirius XM, which closed this September.
But at the center of some unfinished business may be Warner Bros. Discovery, which hasn’t lived up to its investor promise of a pure-play entertainment studio. With Zaslav throwing open the door for further mergers in a trial balloon during a post-earnings analyst call on Nov. 7, Malone who is a shareholder and boardmember of WBD, may be able to put his finger on the scale. Malone has in the past spoken of “free radicals,” meaning smaller- to mid-sized media companies, having to look for consolidation options to gain scale. But experts differ on whether WBD will be a buyer or a seller given its debt load.
Late in 2023, Guggenheim Securities analyst Michael Morris suggested in a report that WBD could look to acquire a company with an existing NFL broadcasting arrangement, “with Fox or Paramount Group as the most likely possible targets.” And, indeed, per a regulatory filing in early November, Warners held talks with Paramount Global about a potential combination before David Ellison and Skydance Media sealed a deal to take over Shari Redstone’s empire.
“I do not think Malone is going to push this short term but it seems like WBD inevitably gets sold or broken up,” Pivotal Research Group analyst Jeff Wlodarczak says.
As for break up possibilities, Robert Routh, analyst at FBN Securities, notes that Malone could push to “seek to have them take DC Comics public as a separate entity via either a tracking stock or regular IPO to highlight the true value of the WBD library, as that would be the easiest way to do that.”
Or there’s CNN, which Bank of America suggested in a July report could fetch about $6 billion on the market. Or Warner Games, home to Hogwarts Legacy, could be spun off for around $5.6 billion. Less valuable: the linear TV brands like TNT, TBS that have been a drag on the company’s earnings in recent years.
Analyst Craig Moffett, who spoke with Malone before issuing his own guidance about his next moves in late September, wrote in a research note that he believes the mogul feels that the sale or spin-off of parts of WBD “might not be attractive, but perhaps a tracking business would be.” Malone explained that “from a financing perspective, one could make a case for a tracking stock that would have the linear business in it,” Moffett wrote. “They would then essentially have a growth side and a cash cow side, and they could allocate a lot of the debt to that side, and maybe even attract private equity into that, so that, without going through taxes, they could isolate the studio and the growing parts of the business. That would probably carry a much higher multiple, he suggested.”
Beyond Warners, Malone is exploring a merger of Charter Communications, the second-largest U.S. cable operator, and his Liberty Broadband, which owns a large stake in the cable giant along with GCI, Alaska’s largest communications provider. Liberty Broadband disclosed on Sept. 23 that Charter had sent an initial merger proposal, to which it responded with a counterproposal.
Importantly, the all-stock transaction is “intended to be tax-free,” Liberty emphasized. After all, while the only things that are certain are death and taxes, according to the old saying, Malone has always had a reputation for focusing on deal structures that avoid taxes.
Long-time Malone watchers see his recent deal plays as logical steps. Call it his own game of checkers, in which he positions his pieces and waits for opportune times to form a deal that suits him. Routh adds, “I think he is estate planning and simplifying his empire as he ages as it holds too much value to stay this complex.”
Malone’s near-term focus is expected to be on finalizing a Charter deal, with Street observers predicting a final structure that can be seen as a win-win will be hammered out. His game plan could open up more deal options. “It also eliminates an entity with five classes of stock and would make an entity with a single class of stock that would be much easier for another to acquire,” Routh highlighted.
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