Warner Bros. Discovery (WBD.US) is implementing a spinoff plan and may sell a 20% stake in its film studio and streaming business before completing the spinoff next year. Chief Financial Officer Gunnar Wiedenfels stated at the Bank of America Media, Communications & Entertainment Conference: "We want to achieve its full value. Multiple institutional investors have inquired about participating in the investment ahead of the spinoff completion in the second quarter of next year."

Based on analysis of the company's spinoff plan, asset value unlock pathway, and potential catalysts, Bank of America maintains a "Buy" rating on Warner Bros. Discovery with a $14 price target.

Under the spinoff scheme, "Global Discovery," which will retain traditional television and digital networks including CNN and Discovery Channel, will hold a 20% stake in Warner Bros., the latter containing film studios and HBO Max streaming business.

Wiedenfels noted that Warner Bros., which became heavily indebted after merging with Discovery Channel, has reduced net debt to approximately $30 billion and "will see further significant reduction by year-end." Selling equity represents another "creative toolbox" item to help reduce debt, which has become his recent focus.

Any potential transaction would require "weighing trade-offs" as Warner Bros. seeks to "obtain full value. Securing equity injection at reasonable valuation is a crucial cornerstone of the entire transaction." Wiedenfels said the company has one year to complete the tax-free transaction, but "investors have already expressed interest in early negotiations."

Wiedenfels, who will serve as CEO of the Discovery business, emphasized that Warner Bros. is committed to building "two companies with tremendous growth potential," while current Warner Bros. CEO David Zaslav will lead the film studio and streaming business.

Regarding industry trends such as Comcast and other companies spinning off traditional television networks, Wiedenfels stated: "We will evaluate all options while maintaining prudent principles and making decisions guided by genuine value creation opportunities."

On June 9, Warner Bros. announced it would split into two public companies through a tax-free transaction: Streaming & Studios (S&S) and Global Networks (GN).

Streaming & Studios encompasses core assets including Warner Bros. Television, Film Group, DC Studios, Gaming Division, HBO and HBO Max, and television and film libraries. Bank of America views this as the "crown jewel" in the media sector, whose intellectual property and content library value has been masked by historical heavy debt burden and traditional cable television business challenges. Post-spinoff, this business segment is expected to break free from debt constraints and unleash growth potential, potentially holding strong appeal for acquirers seeking to expand scale.

Global Networks includes linear entertainment, sports, and news television channels globally. Despite market pessimism toward traditional linear television business, Bank of America notes that with appropriate capital structure and management team operation, at current valuation levels, this business still possesses underappreciated equity value creation potential. Potential strategic options include cash management, integration with other similar linear assets, asset sales, and private equity investment.