Bloomberg Intelligence estimates that Paramount could get about $8 billion plus legal concessions if it sells TBS, CNN, and TNT to settle the cases. Those three channels bring in roughly $2 billion in yearly profit before interest and taxes. Analyst Geetha Ranganathan says they would sell for about four times that annual profit, which works out to the $8 billion price.
The sale would be a way out of a legal mess threatening the whole merger. David Ellison's media company is trying to buy Warner Bros. for $110 billion, and most global regulators have already signed off. But two legal challenges remain, and they are not going away quietly.
The pending suits come from a dozen state legal officers, along with the Writers Guild. California Attorney General Rob Bonta is leading the states, and he is pressing for significant alterations to the agreement before agreeing to settle. Paramount says it is open to a structural fix, which is deal-speak for changing how the combined company is organized.
The states argue the merger would give the combined company 27% of all pay-TV distributor fees and 34% of basic cable viewers. That is a lot of control over what people watch and what cable companies pay to carry those channels.
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Paramount has floated other options too. It has explored selling HGTV and the Food Network, and it has offered separate distribution deals with cable operators to address the concerns. But the market for cable networks is weak right now, which makes selling harder than it sounds.
Disney just sold its stakes in A&E and History to Hearst earlier this month after trying for over a year. If a giant like Disney struggles to unload cable assets, that tells you something about demand.
Rich Greenfield, an analyst at LightShed Partners, points out the irony of the whole situation. "The beauty of the transaction is you were buying all of the cable networks," he said. Selling assets to satisfy regulators would undo the very reason for doing the deal in the first place.
He also warns that fighting the lawsuits in court could cost hundreds of millions of dollars and still end in failure. That leaves Paramount in a tough spot: pay up to settle, sell off pieces, or risk a long and expensive legal battle.
The bottom line: For investors watching from the sidelines, this deal is a reminder that big mergers rarely close on schedule. The outcome will shape the media landscape for years, and the next few months will show whether Paramount can thread this needle.