Paramount Skydance-Warner Bros. Discovery bid would combine big content

David Ellison looks to be buying up a media empire.

The CEO and chairman of the newly minted Paramount Skydance has tapped an investment bank to help prepare a takeout offer for Warner Bros. Discovery, according to people familiar with the matter who spoke on the condition of anonymity to discuss nonpublic dealings.

Warner Bros. Discovery had yet to receive an offer as of Thursday, according to people familiar. However, shares of the company soared almost 30% Thursday afternoon, notching the stock’s best day of trading on record.

Representatives for Paramount and Warner Bros. Discovery declined to comment.

Bringing Warner Bros. Discovery into the fold would add to Ellison’s growing list of franchise acquisitions and sports media rights. WBD, which announced in June it plans to separate into two entities, has a suite of desirable assets. Add those to Paramount’s collection of intellectual properties and Ellison could have a content behemoth on his hands.

“A bid for WBD would solidify the overlooked value of its portfolio of assets that was weighed down by its balance sheet,” Robert Fishman, analyst at MoffettNathanson, told CNBC Thursday.

More recently, it has expanded its video game-based IP beyond Sonic the Hedgehog, which is a billion-dollar franchise in its own right, to snag the rights to make a Call of Duty theatrical film and the distribution rights to Legendary’s Street Fighter adaptation.

Warner Bros. Discovery has a massive library of major franchises including DC superheroes, Lord of the Rings, Game of Thrones and Harry Potter. It also has legacy cartoons like Scooby-Doo, Looney Tunes and Tom and Jerry. It is also the distributor of Legendary’s Dune franchise and Godzilla and King Kong films.

Last year, Warner Bros. was the second-highest grossing studio at the global box office and Paramount was the fifth-highest, according to data from Comscore.

In addition to bolstering Paramount’s theatrical slate, Warner Bros. Discovery’s streaming service HBO Max counts more than 125 million subscribers as of the end of the second quarter. Paramount+ currently has around 77 million streaming users.

In the wake of the Paramount-Skydance merger, Ellison also secured a $7.7 billion, seven-year deal to make Paramount the exclusive U.S. home for TKO Group’s UFC mixed martial arts organization. The agreement means UFC will stop its pay-per-view model and events will be available directly to Paramount+ subscribers and, in some cases, on CBS.

Sports rights are scarce and only become available when previous deals expire. Apple is already expected to be the home of Formula 1, and Major League…