Warner Bros. Looks Into Selling Itself. The Stock Jumps.

Warner Bros. initiated a sale of the entertainment company. (Getty Images)

Key Points

• Warner Bros. Discovery is exploring strategic alternatives, including a potential sale, after receiving interest from multiple parties.
• Shares of Warner Bros. Discovery rose on Tuesday and were on pace for their highest close since April 25, 2022.
• The company says its board of directors will look into a range of strategic options.

Warner Bros. Discovery stock surged after the media entertainment company said Tuesday that it’s looking into selling itself.

Warner Bros. said in a news release that it has initiated a review of strategic alternatives in light of interest it has received from multiple parties.

Warner Bros. told Barron’s on Tuesday that it can’t be more specific about who has bid or expressed interest in a possible merger.

The company said in the press release that its board of directors will look into a range of strategic options, including continuing the process of breaking up into two publicly-listed entertainment companies by 2026, which was announced in June. Through the current split-up plan, one company would become home to its movie studios and HBO Max streaming platform, while the other will include cable channels like CNN.

However, Warner Bros. said Tuesday it would also look at other options, such as a merger of Warner Bros. and a spin-off of Discovery Global to shareholders.

“Given the company’s wealth of premium IP (Harry Potter, DC, Lord of the Rings, Game of Thrones etc.) and robust library, we continue to believe Warner Bros. is an extremely attractive potential acquisition target,” BofA Securities analyst Jessica Reif Ehrlich wrote in a note on Tuesday. “At takeout valuation, we estimate the consolidated WBD entity is worth ~$30 per share.”

Ehrlich rates the stock a Buy and has a $24 price target.

Shares were up 10% to $20.20, and were on pace for their highest close since April 25, 2022, according to Dow Jones Market Data. The stock was also the best performer in the Nasdaq 100.

“Today’s acknowledgement of multiple unsolicited parties indicating interest in the company (for both the entire company and Warner Bros.) should provide a floor for the share price,” Ehrlich added.

Tuesday’s announcement comes after The Wall Street Journal reported in September that Paramount Skydance was preparing a takeover bid for Warner Bros. Paramount declined to comment.

Paramount stock was down 2% to $16.66.

Warner Bros. investors have been excited about a potential takeover, with the stock up 90% this year and 167% over the last 12 months. But it hasn’t been an easy road.

Bloomberg reported earlier this month that Warner Bros. rejected an offer from Paramount of about $20 a share, citing people familiar with the matter. Barron’s has reached out to Warner Bros. for comment on this reporting.

“Even if the WBD Board ‘should’ say yes at $20/share, we suspect they want substantially more given their ‘hopes’ for a bidding war for the studio and HBO following the split in April 2026,” LightShed analyst Richard Greenfield wrote on Monday.

Greenfield added that while he thinks a bidding war for Warner Bros. Discovery after it possibly splits is unlikely, “we can certainly see how the WBD Board could foresee a bidding war breaking out, driving the need for Paramount to meaningfully overpay for WBD .”

Write to Angela Palumbo at angela.palumbo@dowjones.com