Skydance Aims to Reduce Debt Following Paramount and Warner Merger

Skydance CEO David Ellison stated that the merger of Paramount and Warner leaves the company poised to excel in all areas of business. However, the combined group starts with a debt of approximately $79 billion and aims to reduce leverage to three times. The debt is close to seven times earnings according to CNBC's David Faber, and the reduction plan relies on $6 billion in synergies – savings from merging operations.

Ellison spoke on CNBC’s Squawk Box after Paramount completed its acquisition of Warner Bros. Discovery for $110 billion. The merged company is now called Skydance. “We are ready to win in every segment we operate in,” Ellison stated. Skydance Co-CEO Ynon Kreiz mentioned that the savings cover technology, marketing, real estate, and labor, with labor accounting for a smaller portion. Management aims to achieve savings within three years and $10 billion in free cash flow by 2030. Kreiz cited a pro forma EBITDA of $12 billion for the next year; Ellison, in an earlier CNBC interview, estimated leverage at 4.3 times, based on $18 billion EBITDA including $6 billion in savings. Faber estimated annual interest expenses at $6 billion and dividends at $800 million.

Kreiz rejected the label of “cost-cutting” and described the plan as a restructuring of company operations, pointing to mid-single-digit revenue growth over the next three years. In July 2018, Mattel announced a reduction of 2,200 jobs – 22% of its non-managerial workforce (Fortune); Kreiz became CEO of Mattel in April of that year. When Faber asked about a similar approach, Kreiz responded that integration is underway but did not specify the numbers of reductions. Ellison cited over 200 million streaming subscribers and a 12% share of TV viewership – second only to YouTube. The repayment plan depends on revenue growth and achieved savings, with Ellison himself acknowledging the decline of cable TV, while Paramount shares traded at multi-year lows at the end of September.