Hedge fund Standard General is in talks to buy Warner Brothers Discovery's television assets, could CNN be the deal "tipping point"?

According to reports from informed sources quoted by the media, hedge fund Standard General has been in negotiations regarding the possibility of acquiring or investing in the television assets of Warner Brothers Discovery (WBD.US). The report stated that at least one major shareholder of Warner Brothers Discovery has contacted Soo Kim, the founder of Standard General, proposing the acquisition of all or part of Warner Brothers Discovery's television assets, including CNN. It is worth mentioning that President Trump has repeatedly criticized CNN programs and, last week, stated that any acquisition of Warner Brothers Discovery must include the sale of its cable news network, CNN. Trump said, "CNN must be included in the deal or sold separately," and accused the news network of being run by "a group of extremely dishonest people." Recent reports have suggested that Paramount's CEO David Ellison has assured Trump administration officials that if they successfully acquire Warner Brothers Discovery, they will make major reforms to CNN. Trump has announced that he will be "involved" in the decision to approve Netflix's acquisition of Warner Brothers Discovery. Sources revealed that Trump has privately given positive feedback on Paramount's acquisition plan and stated that CNN should be run by people who are more friendly to the Republican Party. Trump's statements have raised concerns that he may favor a particular bidder and influence the acquisition outcome through the Justice Department's antitrust investigation. An informed source revealed, "CNN has significant political influence in the United States, and Ellison believes he is the one who can solve this problem. Trump doesn't care about streaming services, he only cares about CNN. Paramount needs CNN to be part of this deal, everyone else wants to exclude it." Analysts point out that Paramount's bid aims to acquire all of Warner Brothers Discovery's assets (including television assets like CNN). The company has traditional television networks like CBS, more experience operating cable news businesses, and more mature relationships with advertisers. The addition of CNN can strengthen its traditional media portfolio and create synergies. If CNN is divested, the strategic value of its "full integration" will be compromised. For Netflix, the acquisition may proceed more smoothly if television assets like CNN are divested. Warner Brothers Discovery Prefers Netflix Although Trump has focused on the fate of CNN, both Netflix and Paramount will face a series of legal reviews in their acquisition of Warner Brothers Discovery. Analysts worry that the acquisitions may raise monopoly concerns and not be in the best interest of American consumers. On December 5th, Netflix announced a deal to acquire Warner Brothers Discovery's movie and television production department and HBO Max streaming service for a corporate value of $82.7 billion. Warner Brothers Discovery's television assets (including CNN, TBS, and TNT) are not included in Netflix's acquisition. As audiences shift towards streaming services, traditional cable television businesses are experiencing significant contraction. In the most recent quarter, Warner Brothers Discovery's cable television network division revenue dropped by 23%, attributed to customer cancellations and advertiser losses. In a potential deal with Netflix, Warner Brothers Discovery plans to divest its television assets before the transaction is completed. This strategic adjustment by the company is aimed at addressing debt pressures, and separating declining cable television businesses from growing IP and streaming assets can help optimize valuation. After Netflix announced the acquisition of Warner Brothers Discovery, President Trump raised potential antitrust concerns about the deal. Paramount has made a hostile bid of $108 billion to acquire Warner Brothers Discovery, planning to acquire all its assets, including television assets. Paramount claims that its offer is more attractive to shareholders compared to Netflix's proposal and has a better chance of passing regulatory scrutiny. Paramount also stated that its bid "provides an additional $18 billion in cash compared to the consideration proposed by Netflix." Facing the possibility of their acquisition of Warner Brothers Discovery being disrupted, Netflix's two co-CEOs, Greg Peters and Ted Sarandos, outlined the reasons for the acquisition in an employee memo this Monday, attempting to ease concerns in the industry about layoffs and the end of theatrical releases. They promised to release Warner Brothers Discovery's movies in theaters - previously there were concerns that Netflix would prioritize streaming, and Sarandos had described going to the movies as an "outdated" experience. The co-CEOs stated in the memo, "We haven't prioritized theatrical releases in the past because it wasn't Netflix's business. When this deal is completed, we will enter this business area." Furthermore, concerns have been raised that Netflix's acquisition of Warner Brothers Discovery in the already affected media industry by streaming platforms and the rise of artificial intelligence could result in layoffs. In response, Greg Peters and Ted Sarandos promised, "There will be no business overlaps or studio closures." They said, "This deal is about growth. We are enhancing one of Hollywood's most iconic studios, supporting jobs, and ensuring a healthy future for film and television production." Greg Peters and Ted Sarandos also cited Nielsen's audience share data to argue that the acquisition of Warner Brothers Discovery would not pose a monopoly risk. The data shows that the audience share percentage after Netflix's merger with Warner Brothers Discovery would be less than YouTube, or less than the potential audience share after a merger between Paramount and Warner Brothers Discovery. Warner Brothers Discovery has shown a preference for Netflix. It was reported that the company suggested to its shareholders on Wednesday to reject Paramount's hostile takeover bid and instead support their original agreement with Netflix, deeming Paramount's offer as "inferior" and "inadequate." The company's board of directors expressed several concerns over Paramount's takeover bid, including its uncertain financing arrangements and the risk of the deal being terminated at any time. The board of Warner Brothers Discovery believes that Paramount's offer contains restrictions on the company, such as its ability to refinance debt. The deal also requires the company to pay Netflix a $2.8 billion termination fee. The board stated that Paramount's bid "is still inferior to the merger with Netflix." The board unanimously recommended the deal with Netflix, stating that "the terms of the Netflix merger are superior," while Paramount's offer "provides insufficient value and imposes numerous significant risks and costs." Both parties' takeover offers have raised concerns in Hollywood about further industry consolidation and have drawn criticism from across the political spectrum. A deal with either party will trigger months of regulatory review. While Paramount insists that their deal has the best chance of regulatory approval, Warner Brothers Discovery believes that Netflix and Paramount are on equal footing in this regard.