Zaz in Limbo

**Bill Cohan** (0:02)
He's basically has to ask permission from the Ellisons really to do anything of substance. You know, this is an industry that is changing rapidly, and he's sort of on the strategic sidelines until this gets resolved one way or the other.

**Peter Hamby** (0:22)
Welcome to The Powers That Be Daily, Puck's podcast focused on the intersection of Wall Street, Washington, Silicon Valley and Hollywood, and the players who run it all. I'm Peter Hamby. It's Tuesday, August 4th. Today, I'm joined by Bill Cohan, who explains why the frozen Paramount Warner Brothers merger facing an antitrust lawsuit is putting David Zaslav in a bind. At Warner Brothers, he can't really do anything right now under the terms of the deal without getting approval from the Ellisons first. Bill tells me what Zaz can and can't do in the meantime.
We also discuss whether the irrationally exuberant world of Wall Street IPOs, which continue to make bankers and underwriters very rich, can possibly be reformed.
We'll discuss all that and much more on today's episode of The Powers That Be.
Happy Tuesday everybody and welcome to The Powers That Be. I'm joined today by my colleague Bill Cohan. We're going to talk about the delayed Parabros merger. We're also going to talk about one of Bill's favorite topics, the overheated, ridiculous, goofy IPO market. And if there are any solutions to fix this cash carnival that benefits everybody, except for retail investors and smaller companies, I think. Anyway, Bill, it's good to see you. Thank you for joining me from your summer cottage on Island. Let's get into this Warner Brothers Paramount merger. Obviously, it's been delayed pending trial. This is after many Democratic Attorneys General, led by California Rob Bonta, here where I am, sued to stop the merger on antitrust grounds. Now, the trial is not set, but this merger so far, just based on the rules here, has been delayed until June of 2027 Paramount wants this done faster. The Democrats want to delay this. Hey, maybe it will get into the next administration. You never know. You never know. We'll see what happens. But I want to talk to you specifically about the Warner Brothers' angle here, because so many people are talking about Paramount. David Zaslav obviously made a pretty penny off of this merger, and it stands to make even more. We know him at POC very well, thanks to you and some of our other colleagues. He is a recurring character at our company and in our coverage. He's a deal maker. He's a hustler. He came in to slash the debt, drive up the stock price. One sort of under covered angle to this merger and its delay is the fact that Warner Brothers can't really do anything in the meantime. Everything is frozen. And so if you think about the last few years and the moves that Zaslav has made, he can't do anything. He sort of hands up while this is happening. Can you dig into that a little bit? Why does this freeze inhibit Warner Brothers and Zaslav from doing anything? Or was it just the merger itself rather and not the legal questions around it?

**Bill Cohan** (3:32)
Well, this how to operate the company between signing and closing is all laid out in the merger agreement and was heavily negotiated. In the first rounds of the negotiations with Paramount, even before they were chosen to be the winner, because obviously you remember Netflix was the first company that Warner Brothers agreed to do a deal with and had a merger agreement with.
And then Paramount obviously came in and offered more money and the merger agreement with Netflix was rescinded and one was signed with Paramount. So even before that happened, Paramount was trying to restrict what Zaslav and Warner Brothers could do between the signing of the merger agreement and closing. And as you remember, some on the Paramount side thought that that closing could be July 15th. Well, obviously, we're going to be far away from that now. So all of a sudden, what those operating covenants are between signing and closing become much more relevant because if the deal is now not going to close till the earlier of adjudication of this antitrust issue, which could go to the Supreme Court, which means it could take forever, or June of 2027, then that's like 11 months that David needs to continue to operate this company as an independent, publicly traded company with its own board. But he basically has to ask permission from the Ellisons really to do anything of substance while this thing is waiting on closing. He can operate it in the normal course, but he can't really even enter into any joint ventures.