Warner Bros Discovery Split Unlocks Value With Dual-Company Focus

Last week, we spotlighted a stock to put on your radar in June, Warner Bros Discovery (NASDAQ:WBD) and this week it is moving.

Media conglomerate Warner Bros Discovery saw its stock price rise some 8% on Monday after the company announced it was splitting into two separate publicly traded companies. In our article last week, we discussed the likelihood of this happening soon, laying out some of the reasons why. Now it is official, as the company announced the split Monday.

The two companies will consist of Streaming & Studios and Global Networks.

Streaming & Studios will be made up of Warner Bros. Television, Warner Bros. Motion Picture Group, DC Studios, HBO, and HBO Max, along with its film and television libraries. David Zaslav, the current CEO of Warner Bros Discovery, will be the president and CEO of Streaming & Studios.

“By operating as two distinct and optimized companies in the future, we are empowering these iconic brands with the sharper focus and strategic flexibility they need to compete most effectively in today’s evolving media landscape,” said Zaslav.

Global Networks will encompass its television networks including CNN, TNT Sports, and Discovery, along with digital products such as the Discovery+ streaming service and Bleacher Report (B/R). Gunnar Wiedenfels, the current CFO of Warner Bros. Discovery, will serve as president and CEO of Global Networks.

“This separation will invigorate each company by enabling them to leverage their strengths and specific financial profiles. This will also allow each company to pursue important investment opportunities and drive shareholder value,” said Wiedenfels.

Mid-2026 Split-Eyed

The split is targeted for completion in mid-2026, so until then, the current Warner Bros Discovery structure will remain in place.

Officials said this will be a tax-free transaction, adding that each company will have well-capitalized structures to support their businesses. The firm announced the commencement of tender offers and consent solicitations across its capital structure to enhance its debt portfolio, which will be funded by a $17.5 billion bridge facility provided by J.P. Morgan. The bridge facility will be refinanced prior to the separation.

“Both companies will have a clear path to de-leveraging with significant cash flow and strong liquidity through cash and revolver availability,” officials said. Further, Global Networks will hold up to a 20% stake in Streaming & Studios to help to reduce debt.

Currently, the combined company is carrying about $37 billion in long-term debt. Warner Bros and Discovery merged in 2022 to form Warner Bros Discovery.

Focus on Expanding HBO Max

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Management said the separation will allow the companies to be faster and more aggressive in pursuing growth opportunities for their own operational and financial goals.

Streaming & Studios will focus on expanding HBO Max, which is now in 77 markets with new launches planned for 2026. It will also prioritize achieving at least $3 billion in annual adjusted EBITDA for Warner Bros studios.

Global Networks will invest in its international growth, elevate its live content offerings in sports and news, and grow the digital extensions of Discovery+, B/R, and CNN.

It will be a year until the split happens, but there’s plenty of room over the next 12 months for this cheap stock to grow. It is a bargain with a price-to-sales ratio of 0.62 and a price-to-book value of 0.72. Further, analysts predict a $13 per share price target, which would represent 23% growth over the next 12 months.

Original Post

Written By: ValueWalk