Warner Bros. Discovery is reassuring president and CEO David Zaslav and other top execs that they will be able to retain their stock options even if the company is sold.
WBD last month announced that it had received in-bound acquisition interest from “multiple parties” and has commenced a process to review such offers. David Ellison’s Paramount Skydance is known to have submitted bids for WBD in its entirety, while Comcast and Netflix have been putting together bids for the company’s streaming and studio operations. The deadline for “nonbinding first-round bids” is Nov. 20, as Warner Bros. Discovery is looking to have the process wrapped up by the end of the year, the Wall Street Journal reported.
The potential bidding war for WBD emerged after Warner Bros. Discovery started a process of splitting in two. In June, the media conglomerate said it would separate into two companies: one entity called Warner Bros. (comprising HBO Max streaming and studios), to be led by Zaslav as CEO, and the other called Discovery Global (TV networks and Discovery+), which will be headed by current CFO Gunnar Wiedenfels. The separation is expected to be completed by April 2026.
With the strategic review process, WBD’s board said it will consider a deal structure that would enable a merger of Warner Bros. with a third-party acquirer alongside a spin-off of Discovery Global to shareholders.
The original plan for the separation was to spin off Warner Bros. as an independent company, with Discovery Global the remaining entity. In an SEC filing Thursday, Warner Bros. Discovery said it was clarifying that if there’s a “reverse spinoff” — in which Warner Bros. is the remaining entity and Discovery Global gets spun off — the same terms of Zaslav’s employment agreement will apply. The amendment specifies that a “reverse spinoff” that occurs before Dec. 31, 2026, will be treated the same way as the originally planned separation for purposes of the forfeiture condition that applies to Zaslav’s signing options.
In addition, the amendment to Zaslav’s employment agreement says his signing options will remain “outstanding and eligible to vest and be exercised” following Dec. 31, 2026, not only if there’s a reverse spinoff but also if WBD or the new Warner Bros. enters into a “definitive agreement for a transaction that would, upon completion, constitute a ‘change in control’ of WBD, but excluding any sale of Discovery Global or all or substantially all of its assets.”
If WBD enters into a “qualifying change in control agreement” before Dec. 31, 2026, and has not completed a separation (or reverse spinoff) by then, the amendment to Zaslav’s employment agreement provides that the term of his employment agreement will continue until Dec. 31, 2030 (as would have been the case had the separation been completed prior to the December 2026 end date) rather than ending Dec. 31, 2027. “This extension is intended to secure Mr. Zaslav’s leadership of WBD for the same period that we had contracted to have him serve as the Chief Executive Officer of Warner Bros. following a Separation,” Warner Bros. Discovery explained. “This ensures that, if the Strategic Review leads to our entering into a [qualifying change in control agreement] before [Dec. 31, 2026], Mr. Zaslav will have the same opportunity to vest in, and incentives from, the Signing Options that he would have received had a Separation been completed in 2026.”
The amendment also clarifies that “certain internal restructuring transactions necessary to effect any of the strategic alternatives that we are reviewing will not constitute a ‘Change in Control’ or ‘Qualifying Transaction’ for purposes of the Zaslav arrangements, and will not result in accelerated vesting or the release of any forfeiture conditions on the Signing Options.”
In the SEC filing Thursday, Warner Bros. Discovery said it also has sent letters to its other executive officers who have entered into new employment agreements that are subject to (and contingent on) a separation, — including Wiedenfels, chief revenue officer Bruce Campbell and head of streaming and games JB Perrette — similarly clarifying that a “reverse spinoff” will be treated the same way as a “separation” for all purposes of such agreements.
The new WBD employment agreement that Zaslav entered into June 12 will “significantly reduce his target annual compensation, including lowering his annual cash compensation opportunity and reorienting the total pay mix toward long-term incentives,” according to an SEC filing. The WBD board’s compensation committee said it believes the new structure “will foster a stronger alignment with stockholders and incentivize sustained, long-term value creation.”
In 2024, Zaslav’s total compensation was $51.9 million, up 4.4% year over year, including a cash bonus of $23.9 million and $23.1 million in performance-based restricted stock grants.
Under the new agreement, as CEO of Warner Bros. Zaslav will have a base salary of $3 million per year for the duration of the term, as he does now. Following the separation (or “reverse spinoff”), Zaslav’s target annual cash bonus opportunity will be reduced to $6 million, with the actual payout based on the achievement of performance goals — down from a cash bonus target of $22 million under his current agreement. Zaslav will also be eligible to receive annual equity awards following the separation or reverse spin under a new Warner Bros. equity incentive plan with a target value of $15.5 million the first year that he receives an equity grant from the company; that will be reduced to an annual target value of $7.5 million per year thereafter during the term of his employment. According to Zaslav’s current Warner Bros. Discovery agreement, his equity bonus target value per year is $23.5 million.
On June 12, Zaslav also received a one-time “inducement” that the board’s compensation committee believes “will incentivize the successful completion of the Separation and stockholder value creation.” That award consists of 20,898,776 stock options in the form of 60% performance-vesting stock options and 40% time-based stock options. In addition, Zaslav is set to receive 3,052,734 stock options on Jan. 2, 2026, which will be subject to the same split of performance-vesting and time-based vesting conditions (and provided that he remains employed on that date). Depending on various scenarios and contingencies, Zaslav may not be able to exercise all of those stock options.
Prior to the separation or reverse spinoff, Zaslav will continue to serve as Warner Bros. Discovery’s CEO with the same annual base salary, cash bonus opportunity and grants of performance-based restricted stock units under his prior agreement.