Warner Bros in talks with Paramount Global over a potential merger

The merger would put a number of pay-TV and broadcast stations, such as HBO and CBS, under a single roof. Reuters

Warner Bros Discovery has held talks on a possible merger with Paramount Global, potentially combining two of the biggest media companies in the world.

The talks are preliminary and may not lead to an agreement.

David Zaslav, chief executive of Warner Bros Discovery, met his Paramount Global counterpart Bob Bakish on Tuesday in New York to discuss a possible deal, Axios reported earlier.

He also spoken with Paramount chairwoman Shari Redstone, whose family company owns a controlling stake in Paramount, the owner of CBS and other television properties.

A combination of the companies would unite famous Hollywood properties, including the Paramount and Warner Bros film and TV studios, and put a number of pay-TV and broadcast stations, such as HBO and CBS, under a single roof.

The merger would probably face intense scrutiny by federal regulators who have challenged numerous combinations under the Biden administration.

According to Axios, Warner Bros executives said they could complete such a merger because their company does not own a broadcast network like Paramount’s CBS.

Both companies have struggled as consumers have cancelled cable-TV subscriptions in favour of a new generation of streaming services.

The streaming businesses are expensive to run and have not made up for shrinking profits at traditional networks. Programming costs, especially for sports, have been escalating.

Sources familiar with Paramount’s thinking say the board has been more open to strategic alternatives, such as an alliance with another big media business, or even a sale to a private equity buyer or technology company.

Paramount has been selling non-core assets, such as its real estate and Simon & Schuster booking publishing business.

Bloomberg News reported on Wednesday that the company was once again holding talks about a sale of the Black Entertainment Television network, this time with a management-led group.

The Redstone family owns a majority of the voting stock in Paramount through National Amusements, a family holding company.

Ms Redstone has also held discussions about a sale of her family’s stake in Paramount with film producer David Ellison and RedBird Capital Partners.

Mr Zaslav has shown a great appetite for deals, merging his Discovery cable networks with the Scripps channels and later acquiring Warner Media from AT&T in a $43 billion merger.

The latter deal included tax benefits that bar Warner Bros from doing new acquisitions until April 2024, two years after the completion of the AT&T transaction.

Paramount's shares were down more than 1 per cent in extended trading. Warner Bros was down almost 1.5 per cent.