A Deep Dive Into Warner Bros Discovery With Gary Heffernan
The Special Situations Report Podcast Episode 49
To kick off Season 2 of the Special Situations Report Podcast, we wanted to cover the biggest story in M&A, the bidding war between Netflix (NFLX) and Paramount Skydance (PSKY) for Warner Bros. Discovery (WBD). One of the key voices I follow on X when it comes to media companies is Gary Heffernan and his coverage of every turn of this Warner Bros. Discovery saga convinced me that we should have him on the podcast to discuss Warner Bros. Discovery.
Gary and I had met serendipitously several years ago when we both came across the same strange billboard in Silicon Valley advertising all manner of luxury goods like Rolex watches for very low prices (yes, it was a scam) and exchanged messages about it on X. We then met for coffee and stayed in touch discussing merger arbitrage situations like Activision Blizzard, media companies like Lionsgate Studios (LION) and a wide range of other situations.
Gary previously worked in investment banking at a major global bank, and then in equity research at a multi-trillion dollar asset management firm before finding his way into corporate finance at a Fortune 500 company. He is currently an individual investor managing his own portfolio.
Episode 49 of our weekly Special Situations Report Podcast with Gary is out and can be found on Spotify, YouTube and Apple Podcasts.
We started the podcast with a breakdown of the pre-deal environment and bidding war, and continued with an in-depth examination of both competing bids once the official acquisition had been announced.
We explore the considerations associated with the Discovery Global Networks spinoff as well as the key risks to this deal, including regulatory risks, leverage concerns, and opposition from key media players.
This was easily one of the most comprehensive deep dives we’ve ever done on this podcast, and as such, we learned so much from this discussion. We hope our listeners enjoy this as much as we enjoyed recording it!
You can find Gary on X here.
A list of resources discussed on the podcast include:
Congressional Hearing About Competition and Consumer Choice in Digital Streaming
Voluntary Disclosure: I hold long positions in Netflix, Lionsgate Studios and Workday.
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The regulatory angle on this deal is fascinating, and I think the Pentwater concerns around streaming consolidation have real merit. When NFLX bids for WBD versus PSKY, the concentration analysis shifts dramatically - suddenly one player controls a much bigger chunk of subscription streaming alongside content production. I dealt with similar DOJ pushback on verticle integration in telecom a few years back, and the bar's gotten tighter since then. The congressional hearing clip about digital streaming competiton is gonna be cited heavily in any challenge. One thing that stood out to me: the spinoff of Discovery Global Networks might actually be strategic packaging to make antitrust review smoother, butit also derisks the combined entity from lower-margin international cable declining.