Welcome back to Dry Powder. I’m Bill Cohan.

Lost in the hoopla surrounding Anchormageddon was the swift and sudden defenestration of former NBCU C.E.O. Jeff Shell. To my mind, this development brings us one step closer to my personal favorite hypothetical big media combination: that of NBCU and WBD. In today’s issue, a close look at the math and logistics of that potential deal.

Lemon and Carlson will probably get their money, or at least some of it, but the larger economic and governance questions (where was the Comcast board of directors in all of this?) pertains to the future of NBCU—specifically what Shell’s departure means for the inevitable M&A activity that must occur as legacy media businesses (such as network and linear TV) slowly fade into oblivion and are replaced by streaming businesses that, while wildly popular, remain years away from meaningful profitability. Does Comcast C.E.O. Brian Roberts’ decision to appoint as Shell’s interim successor his right-hand man, company president Mike Cavanagh, suggest that he’s preparing for a hypothetical combination of NBCU with David Zaslav’s Warner Bros. Discovery? Wall Street is obviously preparing the tea. So let me read the tea leaves for you.

In this scenario, as envisioned by me and other smart people I talk to, Zaz would become the C.E.O. of the combined entity, while Comcast would control the board of the company and the majority of its economics. This was essentially how Roberts structured the acquisition of NBCU in the first place, back in December 2009, when the then-C.E.O. of GE, Jeff Immelt, came under severe pressure (at least in his own mind) to sell the business in the wake of the 2008 financial crisis. Comcast bought the first 51 percent of NBCU in January 2011 and then bought the remainder of the company a few years later, in March 2013, for a total consideration of around $30 billion. It was, as I wrote last year, one of the worst media deals in history for GE: At one point pre-pandemic, NBCU was worth around $100 billion, making it a huge success for Comcast, although it’s not worth quite that much these days, amid the decline of linear TV and mounting losses at Peacock.

The alternative, of course, is that Roberts and Zaz continue to cede the higher ground in Hollywood to Netflix and Disney, which have been on a tear the last 15 years. Personally, I don’t think either man is willing to make that concession. Don’t forget, Roberts plays the long game. He lost out on Universal when Vivendi sold it to GE, back in 2003 (and then spent the next six years or so schmoozing Immelt until he got NBCU), and he did all he could to buy Rupert Murdoch’s 20th Century Fox after Murdoch agreed to sell it to Bob Iger and Disney. (In fact, it’s probably fair to say that many of Iger’s current problems running Disney stem from the extra billions in debt it was forced to take on to outcompete Comcast’s stalking horse bid for Fox.)

Disney, in particular, is a major rival for Roberts—he made an unsuccessful hostile bid for the company in 2004, as you may recall—and I think he remains determined to have Comcast vanquish Disney in the end. He also is the man who convinced AT&T to sell him AT&T broadband, its cable subsidiary, when it was not only not for sale but also was not something that necessarily could be bought because neither its stock or debt were publicly traded. But Roberts put a big number on the table—$72 billion—and made the AT&T board an offer it couldn’t refuse. (Along with a bunch of other world-class M&A bankers, including Paul Taubman, Rob Kindler and Steve Rattner, I had a hand in advising Comcast on that deal before and after September 11.)

In other words, Roberts is one determined fellow, even if he keeps a lower national profile than his fellow media moguls. Ditto the more high-profile Zaz. Both of these men are highly competitive, and I don’t believe they are the slightest bit satisfied playing second fiddle to Iger. That’s why I think this combination is not only inevitable but also would be a powerful counterbalance to the Disney and Netflix juggernauts. Not that Shell would have been able to stand in the way of the combination, but his departure certainly takes away one potentially thorny obstacle and creates an imperative for Roberts to find a new leader for NBCU. But no need to look any farther than Zaz, in my humble opinion. And I would think WBD’s two principal shareholders, John Malone and the Newhouse family, would love to see a WBD-NBCU marriage.

Roberts and Zaz aren’t homies. Zaz has many, many close relationships in the industry and people are justly devoted to him. But for some reason, I am told, he has never really clicked with Roberts, who lives in Philadelphia, not New York City or Hollywood (although he does have a nice house in Martha’s Vineyard). Brian Roberts has been one of the toughest nuts for David Zazlav to crack, perhaps, but they can learn to like each other. If the exigencies of doing a deal are powerful enough, then Zaz and Roberts will figure out a way to get along and make it work. Roberts would be the ultimate boss anyway, in the way that Malone and Steven Newhouse are Zaz’s ultimate bosses now. The need for a deal trumps any personal awkwardness.

Zaz is overrated. Another reason for caution, I’m told, is that Roberts wouldn’t want to team up with someone who has, according to some naysayers, delivered more for himself personally than he has been able to deliver for his shareholders. But I don’t quite know what to make of this line of reasoning. By my calculations, when Zaz took over Discovery Communications, in November 2006, the Discovery stock was trading around $8 a share. It got as high as $89 in March 2021 and closed out at around $24 a share in April 2022, just before the merger with Warner Media that created WBD. If you bought in 2006 and held on for the whole ride and didn’t sell, it seems to me you would have tripled your money, thanks to Zaz. If you sold at the peak, you would have had a 10-bagger. Other scenarios are obviously possible too. That’s 16 years; not a barn burning internal-rate-of-return by any stretch. But not tin either.

The story at WBD for the last year has been far different. The stock is down 47 percent since the company was put together a year ago. That’s not great, needless to say. But, in Zaz’s defense, the price of admission for the deal was taking on $55 billion of AT&T’s debt. That makes WBD a publicly traded L.B.O. Until more of that debt is paid down, the stock will not pop. As more does get paid down, though, and WBD’s leverage moves from 4+x EBITDA to 2-3x EBITDA, the stock should move up smartly (this is not investment advice). Zaz has been exceedingly well paid, and Discovery shareholders did fine; WBD’s shareholders still need to be shown the money. But this is another canard of an issue, if you ask me, just as is the one about Zaz and Roberts not being the best of buddies.

A combined WBD-NBCU could never own both the Warner Brothers film studio and the Universal film studio. That’s probably true, especially in the current, how shall we say, more challenging regulatory environment under President Biden. So, the answer is simple: a putative combined company would sell one of the two to Amazon, Apple or Netflix, or spin one of the two off as its own public company, loaded down with some of WBD’s $48 billion of net debt. Assuming this would be a required sale, the harder decision for Zaz and Roberts would be to decide which one of the two studios to send off on its own, but I’m sure the answer is already on a spreadsheet or in an I.P. vault somewhere and that both Zaz and Roberts can reach an agreement. Obviously both studios have been bought and sold plenty of times over the years. So what’s one more sale? It’d be an investment banker’s dream assignment.

A combined WBD-NBCU could not own both CNN and NBC. The consensus I’m getting from my Wall Street brain trust is that this is not true. It all depends on how broadly the market for news can be defined, of course. But there is so much competition for news these days and so many different outlets providing it, 24/7, that the feeling seems to be this is no longer the non-starter it might have been 20 or even 10 years ago. “A CNN-NBC combination, just like a CNN-CBS combination, would make a lot of sense,” one senior M&A banker told me. “People have run those numbers.” In fact, that combination would be a news powerhouse and, the thinking goes, not be a violation of the F.C.C. rules on network ownership.

You can’t get the numbers to work to get Comcast to 51 percent ownership of the NBCU-WBD combination. Not true. NBCU’s “adjusted” EBITDA was just about $6 billion in 2022. Maybe that makes NBCU worth $60 billion, maybe more, especially with NBCU’s theme parks hitting it out of the, ahem, park these days. (In 2022, “adjusted” EBITDA at the Universal theme parks was $2.7 billion, more than double 2021.) WBD’s current equity value is $31 billion; its enterprise value is around $80 billion, accounting for its net debt of around $48 billion. There’s no question that the clever bankers can figure out how to add cash, or other assets, or debt, to the mix to make it work out that Comcast can own 51 percent and control the board of the combined WBD-NBCU. For instance, if (and when) Disney buys Comcast’s remaining stake in Hulu—say for around $9 billion—that can be added into the valuation mix too. The possibilities are nearly endless.

This isn’t a stumbling block. Not when the stakes are so high for both companies and finding a way to compete with Disney and Netflix is paramount. And, of course, given the fees for the bankers that would be available, especially during what is quickly shaping up to be a rather run-of-the-mill M&A year (especially when compared to 2020 and 2021). Although it hasn’t been shared with me, I am certain the Wall Street bankers have already done the analysis on the WBD-NBCU combination and would be happy to share it with Zaz or Brian Roberts, if it hasn’t been shared already. (Feel free to send PowerPoints my way!)

If it’s NBCU-WBD, then a formidable competitor to Disney and Netflix is born. If it’s NBCU and Disney’s media assets, then WBD is left holding the bag and wondering how it competes long-term. Let’s put aside Paramount for the moment; it’s by far the smallest player among the big five and should have been sold long ago. But that’s a Shari Redstone matter, and we’ll leave that for another day.

When you boil it all down, I’m left with the view that any combination between Disney’s media assets and NBCU is a regulatory nightmare—NBC and ABC for starters—let alone the animosity between Iger and Roberts, stemming from, let’s see, both the Comcast hostile offer for Disney back in the day and the Comcast bids for Fox that drove up the price of Disney’s victory considerably. No matter how you slice it, all roads lead back to Brian and Zaz.