Di Discovery Global Loading... : Investor Sentiment and Bull/Bear Views

The spin-off of Discovery Global will create a new public company holding the linear-network business; Nussbaum says it will deliver value on day one and probably substantial value in the future depending on strategic interest.

The preliminary proxy provides first detailed valuation for the spun-off Discovery Global: the board and advisers believe it should trade at 4.5-5.5x adjusted EBITDA, implying $1.33-$3.24 per share. CNN generates about $600 million EBITDA; total adjusted EBITDA is about $4.8 billion this year, falling to $3.9 billion next year and $3.3 billion in 2028 before rebounding. The entity will start with $17 billion of debt, falling to $16.1 billion by year-end, with an average 4.5% interest rate, much of it trading at a discount and $800 million annual interest cost, which the speaker views as potential value for Discovery Global shareholders.

The Discovery Global spin-off is a different and stronger asset than Versant, with more scale, more cash flow, and long-tenured debt that can be discounted and bought back; while the market will ultimately determine its value, the board views it as sufficient to make the Netflix deal superior relative to Paramount's risk.