Warner Bros. Discovery (WBD.US) plans to sell 20% of its streaming equity before a spin-off, CFO says they are seeking "full value"

According to Jinse Finance APP, Warner Bros. Discovery (WBD.US) is implementing a spin-off plan and may sell a 20% stake in its film studio and streaming business before completing the spin-off next year.

Chief Financial Officer Gunnar Wiedenfels stated at the Bank of America Media, Communications & Entertainment Conference: "We want to realize its full value. Before the spin-off is completed in the second quarter of next year, several powerful institutions have already inquired about participating in the investment." Based on analysis of the company's spin-off plan, asset value release path, and potential catalysts, Bank of America maintains a "Buy" rating on Warner Bros. Discovery and gives a target price of $14.

According to the spin-off plan, the "Discovery Global" company, which retains traditional TV and digital networks such as CNN and Discovery Channel, will hold a 20% stake in Warner Bros., which includes the film studio and HBO Max streaming business.

Wiedenfels pointed out that after merging with Discovery Channel and becoming heavily indebted, Warner Bros. has reduced its net debt to about $30 billions, and "will further significantly reduce it by the end of the year." Selling equity is another "creative toolbox" to help reduce debt, which has recently become a key focus for him.

Any potential transaction requires "trade-offs," as Warner Bros. wants to "obtain full value. Obtaining an equity injection at a reasonable valuation is a key cornerstone of the entire transaction." Wiedenfels said the company has one year to complete a tax-free transaction, but "some investors have already expressed a desire to negotiate in advance."

As the soon-to-be CEO of the Discovery business, he emphasized that Warner Bros. is committed to building "two highly promising companies," with current Warner Bros. CEO David Zaslav leading the film studio and streaming business.

Regarding the industry trend of companies such as Comcast spinning off traditional TV networks, Wiedenfels said: "We will evaluate all options, but always adhere to a prudent principle, making decisions guided by real value creation opportunities."

On June 9, Warner Bros. announced it would split into two listed companies through a tax-free transaction: Streaming & Studios (S&S) and Global Networks (GN).

Streaming & Studios covers core assets such as Warner Bros. Television, Film Group, DC Studios, gaming division, HBO and HBO Max, as well as the TV and film library. Bank of America regards it as the "crown jewel" in the media sector, whose intellectual property and content library value have been overshadowed by past heavy debt burdens and challenges in the traditional cable TV business. After the spin-off, this business segment is expected to break free from debt constraints, unleash growth potential, and may be highly attractive to acquirers seeking to expand scale.

Global Networks includes assets such as linear entertainment, sports, and news TV channels worldwide. Although the market holds a pessimistic view of the traditional linear TV business, Bank of America points out that, if operated with the right capital structure and management team, this business still has untapped equity value creation potential at current valuation levels. Potential strategic options include cash management, integration with other similar linear assets, asset sales, and private equity investment.