Three years ago, David Zaslav, the chief executive of Warner Bros. Discovery, had major headaches. The company’s movie studio was in third place, despite a blockbuster performance for “Barbie.” He was slashing costs and shelving projects, turning his once-warm relationship with Hollywood frosty. Shares hit $13, down from nearly $25 when he took control.
One article, in GQ, described Mr. Zaslav as “the most hated man in Hollywood” and compared him to the ruthless tycoon played by Richard Gere in “Pretty Woman.”
Mr. Zaslav is getting the last laugh now.
On Thursday, Netflix dropped out of the bidding for Warner Bros., clearing the way for Paramount to acquire the company for $31 per share, or $111 billion. It was more than double the company’s valuation in September, before news of Paramount’s interest became public.
The deal is a huge win for shareholders and for Mr. Zaslav, the conclusion of a bidding war he played a major role in engineering.
If the deal closes, it will put two major movie studios, Warner Bros. and Paramount Pictures, under the same roof, and combine two news powerhouses in CBS News and CNN.
The deal will also make Mr. Zaslav — one of the most highly compensated chief executives in corporate America for years — an even richer man. The sale to Paramount values Mr. Zaslav’s shares and his other outstanding equity in Warner Bros. Discovery at roughly $790.5 million, according to an analysis from Equilar.
“This whole process has been challenging, it’s been exciting, it’s been thrilling,” Mr. Zaslav said, speaking on the phone from New York, where he had completed a marathon of board meetings. “And I’m glad that it landed with real value for shareholders, and certainty.”
Mr. Zaslav, 66, has been propelled ever-upward in the media industry over the decades by a series of audacious deals. He took over Warner Bros. Discovery after pulling off a deal to combine WarnerMedia with Discovery in 2022.
The latest kicked off in earnest in October, when he set off a heated auction shortly after Paramount submitted its initial bid.
One of the secrets to the deal was an arcane piece of corporate engineering, announced last summer, that eventually brought Netflix and Comcast to the table, along with Paramount. In June, Warner Bros. Discovery said it would split its cable TV business — CNN, Cartoon Network and TNT — from its movie studio and flagship streaming service, HBO Max. That created a market for suitors such as Netflix that might want the fast-growing streaming business but not the fading cable networks. When it came time to sell, there was a competitive bidding market. Netflix initially won out, striking a deal worth $83 billion last December.
“Having that in our back pocket allowed us to pivot and go on offense,” Mr. Zaslav said, referring to the plan to split the company.
Mr. Zaslav stressed that Warner Bros. Discovery spent much of the last four years rebuilding the company so that it was attractive to potential buyers. Specifically, he cited the company’s decision to rekindle important franchises, like “Harry Potter,” “Lord of the Rings” and the universe of characters that sprang from DC Comics, like Superman.
Mr. Zaslav said he sat down with J.K. Rowling, the author of the Harry Potter books, shortly after taking over. And he prioritized — made “mission critical” — bringing DC back to life.
Then there was the movie studio. During the pandemic, Warner Bros.’s previous owners released the company’s movie slate simultaneously on the HBO Max streaming service and in theaters, part of an initiative known as Project Popcorn. That move increased the number of streaming subscribers but damaged the company’s relationships in Hollywood, with many film stars and directors upset that it was wreaking havoc with the traditional theatrical business.
Lately, Warner Bros. Discovery has revitalized its film lineup, delivering a string of hits including “A Minecraft Movie,” “Sinners,” “Final Destination: Bloodlines,” “F1: The Movie,” “Superman,” “Weapons” and the critical darling “One Battle After Another.” The coming slate includes “The Lord of the Rings: The Hunt for Gollum,” “The Batman: Part II,” and “A Minecraft Movie 2.”
But there was also canny maneuvering by Mr. Zaslav and his advisers over the past several months.
Warner Bros. Discovery and its advisers, including the law firms Debevoise & Plimpton and Wachtell, Lipton, Rosen & Katz, and the investment banks Evercore, JPMorgan Chase and Allen & Company, knew that Paramount was dead-set on a deal. After Paramount submitted its first bid in September, they felt sure it would be persistent in its pursuit of the company, according to two people with knowledge of the process who spoke on condition of anonymity because the discussions were private.
After receiving interest from other companies, they figured that the best way to determine how much the company was worth to its suitors, including David Ellison, the chief executive of Paramount, was to put the company up for a competitive auction.
Had Paramount submitted a big bid early in the process, the company could have forced Warner Bros. Discovery’s hand. But its incremental improvements gave Warner Bros. time to stretch out the process, drawing a flurry of bids from Paramount.
The board met roughly 25 times in the two months since its deal with Netflix, the people said. They created a subgroup focused on getting the deal through regulators and prepared for the prospect of litigation.
A key turning point happened last week. The Warner Bros. Discovery board gave Paramount a seven-day window to reopen negotiations. The decision helped pressure both Netflix and Paramount to consider improving their offers.
Late on Saturday night, David Ellison called Mr. Zaslav, informing him they were about to send over the papers, listing off the improvements one by one.
The list surprised the Warner Bros. Discovery board. The Ellison family would raise their bid, to $31 a share, and David Ellison’s father, the tech mogul Larry Ellison, agreed to backstop the entire offer — not just the debt — effectively putting his own money on the line. Paramount dropped a stipulation from its earlier offer that would have allowed it to walk away from the deal if it found that Warner Bros. Discovery’s cable business was performing poorly, undermining the company’s value. And Paramount reiterated that it would pay Netflix the $2.8 billion breakup fee, a cost that Warner Bros. Discovery would have otherwise owed Netflix for changing its mind.
Paramount also threw in an unexpected sweetener: a promise to pay shareholders $7 billion if regulators blocked the deal. Paramount added that because it knew Netflix, which had the ability to counter its offer, had the chance to match, according to the two people with knowledge of the discussions. Netflix has more cash but Paramount believed that it had more regulatory certainty. Mr. Ellison was finally on the verge of cementing a deal he’d pursued for months.
As required by its contract, Warner Bros. Discovery discussed Paramount’s bid with Netflix. And within 24 hours of Warner’s disclosing Paramount’s bid, it was clear the auction was over, and that Paramount had prevailed.
So, too, did Mr. Zaslav.
“We bet big, when we were at Discovery, to get our hands on HBO and Warner Bros.,” Mr. Zaslav said, because they saw that it “was a diamond” — albeit one that was a little “roughed up.”
Benjamin Mullin reports for The Times on the major companies behind news and entertainment. Contact him securely on Signal at +1 530-961-3223 or at [email protected].
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