Comcast, Viacom CBS, Lionsgate! M&A speculation swirls as earnings soar: Will Wall Street’s streaming obsession wane as old companies revive?
ViacomCBS Chair Shari Redstone did the rounds at Sun Valley, but contrary to reports she did not meet ontmoeting Comcast Director Brian Roberts at the Allen & Co. Mogul Mountain Retreat, according to a person familiar with the situation. The Philadelphia-based conglom has been the subject of constant deal speculation since two major mergers have promised to redraw the entertainment landscape if and when they close.
Within a week in May, AT&T’s WarneMedia announced plans to jointly buy MGM with Discovery and Amazon — the latter deal currently under investigation by an FTC led by antitrust reform champion Lina Khan. Both agreements focused on streaming content in an increasingly competitive market. Platforms multiplied and subscribers soared in 2020 during the worst of Covid. But investors became nervous when Netflix and Disney added fewer subscribers in the March quarter, further fueling rumors of a content arms race.
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Now, however, the theme parks are overcrowded, advertise vigorously, and the Tokyo Olympics begin on July 23. As Netflix and AT&T kick off media revenue next week, the question is, one analyst said, “Will The Street forgive a so-so streaming song?” if the core, legacy business is doing well?”
It could be. Even with slower DTC growth, Disney stock was optimistic (albeit in a gloomy market today) on a string of positive research reports. The recovery continues in parks and Disney expects domestic capacity to likely return to normalized levels in the current quarter. All parks worldwide were open at the end of June for the first time since the pandemic struck. Parks and resorts have historically been about a third of Disney’s revenue. Disney reports earnings August 12. (Netflix, to report next Tuesday, has no legacy operations but has added content, including games.)
Neither Netflix nor Disney, which are only recently 20 . has digestedthis The Century Fox acquisition are the names most often heard in a wave of mergers and acquisitions speculation from Hollywood to Wall Street. That would be Comcast – who lost the battle over Fox. One day, bankers would draft deal papers for a merger between Comcast and ViacomCBS. The next, Lionsgate is the notorious target of the NBCUniversal parent. After decades of consolidation, there aren’t that many players left in the mix.
“Everyone talks to everyone,” said one Wall Streeter. Apple could be a buyer. AMC Networks a vendor. Smaller entities from Reese Witherspoon’s Hello Sunshine Media to LeBron James SpringHill are interested.
Lionsgate is a wild card. It has a market cap of $3.5 billion and would sell for a premium to its $5 billion to $6 billion enterprise value. Yesterday, highlighting two of its strengths, it announced the acquisition of the 200 title spyglass library and a 20% stake in the company and held a New York premiere York Power Book III: Raising Kanan, which debuts on Starz Sunday.
“Lionsgate would be a cleaner deal, it’s a better size,” said one Wall Streeter, pointing to some of Comcast’s other smaller moves, including the 2016 acquisition of DreamWorks Animation for about $3.8 billion, and a pact, worth about $1 billion, that NBCU signed with the WWE to bring earlier this year Peacock exclusive US rights to the WWE Network. “That was pretty smart. You wonder if it’s a prelude to buying the whole thing. But that depends on what the McMahons want to do [and] they’re probably not ready to sell the whole thing,” he said.
As for ViacomCBS, he said, “My feeling is that Comcast doesn’t make much sense in making a deal like this. It would be an outright headache,” as both companies own broadcast, cable, and movie studios.” that so far Brian has chosen the path of just milking what he has. It’s an acceptable strategy.”
Another Wall Streeter wonders if Roberts is a little shy after paying top, top dollar for Sky. “Brian is a super long-term person. [But] does that affect his thinking in terms of deals?”
That said, Comcast is indeed focused on growing Peacock and probably needs to acquire more content. An important piece is children and ViacomCBS has that. From a regulatory perspective, there are ways to make it work and make existing Comcast shareholders happy. Most would like to see NBCU as its own company if the content and distribution companies spit, one investor said, “I’d love to see it.” He called Shari Redstone “pretty financially driven. Would she rather do business with Comcast and take Comcast’s stock? That’s a pretty attractive currency.”
Comcast can bide its time — even wait and strike a deal with WarnerMedia Discovery as soon as it closes, expected by mid-next year. It’s not impossible for MGM to become available again in the wake of the FTC probe amid a flurry of anti-Amazon, anti-big-tech sentiment. “It happens. Sometimes a company makes a deal to blow up the works and take another company off the table in a long regulatory process. If it doesn’t get approved, it’s, ‘Ah,’ but you get someone else to do it.” not get,” said one analyst.
Comcast has the financial capacity to buy ViacomCBS and will add billions in the near future when it transfers its minority stake in Hulu to Disney.
The company declined to comment on merger speculation. Asked about deals on the latest earnings conference call, Roberts said, “We are very pleased with the business we have. About 70% of the company, which was broadband focused, turned out to be a really successful model.” He will likely repeat the same at the next interview on July 29.
Backing up this is the fact that Comcast announced in late May that it was resuming a stock buyback program, which Wall Streeters say means it’s not close to a substantial deal. One of them said, “They didn’t have to start buying back shares. They could have waited and made cash.”