Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares dive 13% after restructuring statement

Follows course taken by Comcast's brand-new spin-off company

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Challenges seen in selling debt-laden linear TV networks

(New throughout, includes details, background, remarks from industry insiders and experts, updates share costs)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) - Warner Bros Discovery on Thursday decided to separate its declining cable TV companies such as CNN from streaming and studio operations such as Max, laying the groundwork for a prospective sale or spinoff of its TV company as more cable customers cut the cable.

Shares of Warner leapt after the company said the brand-new structure would be more deal friendly and it expected to finish the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.

Media companies are considering options for fading cable TV organizations, a long time cash cow where profits are deteriorating as countless customers accept streaming video.

Comcast last month revealed strategies to divide most of its NBCUniversal cable television networks into a new public company. The brand-new business would be well capitalized and positioned to acquire other cable television networks if the industry consolidates, one source informed Reuters.

Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable assets are a "extremely rational partner" for Comcast's new spin-off company.

"We highly believe there is capacity for relatively large synergies if WBD's linear networks were combined with Comcast SpinCo," composed Ehrlich, utilizing the market term for conventional television.

"Further, we believe WBD's standalone streaming and studio possessions would be an attractive takeover target."

Under the brand-new structure for Warner Bros Discovery, the cable television organization consisting of TNT, Animal Planet and CNN will be housed in an unit called Global Linear Networks.

Streaming platforms Max and Discovery+ will be under a different division along with film studios, consisting of Warner Bros Pictures and New Line Cinema.

The restructuring shows an inflection point for the media market, as investments in streaming services such as Warner Bros Discovery's Max are lastly settling.

"Streaming won as a habits," said Jonathan Miller, president of digital media investment business Integrated Media. "Now, it's winning as a business."

Brightcove CEO Marc DeBevoise said Warner Bros Discovery's new corporate structure will distinguish growing studio and streaming possessions from rewarding however shrinking cable television service, offering a clearer financial investment picture and likely setting the phase for a sale or spin-off of the cable television system.

The media veteran and adviser forecasted Paramount and others may take a comparable course.

CEO David Zaslav, a veteran deal-maker who led Discovery through its acquisition of Scripps Networks Interactive before acquiring the even larger target, AT&T's WarnerMedia, is placing the company for its next chess relocation, composed MoffettNathanson expert Robert Fishman.

"The question is not whether more pieces will be moved or knocked off the board, or if further debt consolidation will occur-- it is a matter of who is the buyer and who is the seller," wrote Fishman.

Zaslav indicated that scenario during Warner Bros Discovery's financier call last month. He said he anticipated President-elect Donald Trump's administration would be friendlier to deal-making, opening the door to media market combination.

Zaslav had taken part in merger talks with Paramount late in 2015, though a deal never ever materialized, according to a regulative filing last month.

Others injected a note of caution, keeping in mind Warner Bros Discovery carries $40.4 billion in debt.

"The structure change would make it simpler for WBD to sell its linear TV networks," eMarketer analyst Ross Benes stated, referring to the cable television business. "However, discovering a purchaser will be difficult. The networks owe money and have no signs of development."

In August, Warner Bros Discovery documented the worth of its TV possessions by over $9 billion due to unpredictability around costs from cable and satellite suppliers and sports betting rights .

Today, the media company announced a multi-year deal increasing the general charges Comcast will pay to disperse Warner Bros Discovery's networks.

Warner Bros Discovery is sports betting the Comcast arrangement, together with a deal reached this year with cable and broadband company Charter, will be a template for future negotiations with suppliers. That might assist support prices for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles; Editing by Shilpi Majumdar, Arun Koyyur, Keith Weir and David Gregorio)