Warner Bros. Discovery (WBD) and Liberty Global’s bid to sell The Tourist and Traitors maker All3Media could be hampered by concerns over a hefty debt pile and weighty £1B ($1.3B) valuation.

Despite ITV pulling out of the running for the super-indie last month, our sources remain confident that a Deal will ultimately make but several have told us that challenges in the global economy could hold up the process and that interested parties still have multiple concerns.

Mike Fries, CEO and Vice Chairman of All3’s part-owner Liberty Global, recently signaled a “broader [sales] process” will get underway in September after UK network ITV walked away. We hear prospective buyers have baulked at the estimated £1B valuation, especially amid a downturn in the ad and streaming markets and during two strikes, let alone economic challenges in the UK and other parts of Europe.

“People are saying that it’s too expensive and is priced as if this is happening before the [downturn],” said one source who has spoken with multiple advisors involved in the process.

The likes of Banijay, which acquired Endemol Shine Group in 2020, have been rumored to be taking an interest. RTL-owned Fremantle, meanwhile, has been mooted several times but we understand it is not looking at All3 despite spending big over recent years on several high-profile indies.

ITV publicly declared its interest in All3 in mid-June. We understand this went much deeper and that the broadcaster went far into due diligence before subsequently killing a deal a month later, saying only it was “no longer actively exploring” the acquisition. Prior to pulling out, ITV had been far enough down the line that ITV Studios’ bosses met with All3 counterparts to assess integration and structure, we understand.

Bar saying “it’s not scale for scale’s sake,” the broadcaster’s CEO Carolyn McCall wasn’t forthcoming on the reasons behind ITV’s volte-face during last week’s financial results call. Several reports have linked the collapse of the deal to competition concerns and ITV’s falling share price — and these may well have been a factor — but Deadline was told by a source with knowledge of the situation that All3’s debt pile played an equally large, if not bigger, role.

According to its latest full-year accounts, Studio Lambert and Neal Street Pictures owner All3 had net debt of £760M, a sharp increase of 20% on the prior year, although it posted record turnover of £1B and EBITDA of £100M.

“So it’s not a £1B deal, it’s really a £1.76B deal,” said the source with knowledge of the situation, who added that the debt will “effectively almost double the cost” if significant debt repayments are due soon.

ITV itself has debt of more than £600M and, as with the other commercial broadcasters, is struggling to get to grips with the economic downturn and the TV ad market. The combined debt would have reached an “uncomfortably high level” had the ITV-All3 deal gone through, according to Citi analysts quoted in a recent Reuters report.

“We never pay crazy prices”

One potential buyer flagged in multiple conversations about the deal is French-headquartered production powerhouse Banijay, but the Big Brother and Survivor maker has a debt pile three times the size of All3’s load.

Banijay parent FL Entertainment posted H2 results earlier this week, which showed net debt had risen by almost €200M ($218M) over the past six months to €2.27B. During the same period, FL Entertainment initiated a refinancing of Banijay’s debt through a three-year extension of maturity and €200M of new financing.

Another M&A source floated that Banijay would be turned off the deal not only due to debt and valuation but also by the immense effort attached to integrating the two juggernauts. The pair have plenty of overlap and Banijay has only just come off the back of concluding the integration period of its $2.2B Endemol Shine Group takeover, which took place mostly during the Covid-19 pandemic and was anything but smooth.

Banijay declined to comment for this article but CEO Marco Bassetti told The Times late last year: “We are very active in M&A but we never pay crazy prices.”

With these factors in mind, the M&A source speculated that All3 could be ripe for a private equity investor, rather than a sale to a competitor. Other outfits that have been linked include Peter Chernin’s acquisitive North Road, which has a base in All3’s hometown, London. France’s Mediawan and Sony may also be interested, as reported by our sister publication Variety.

Fremantle, which has spent at least $270M on companies over the past couple of years, is not looking at a deal, we understand. Fremantle explored an acquisition of All3 back in 2014, before it sold to DLG Acquisitions, Liberty Global and WBD’s joint venture vehicle. The value of that deal, £550M, is about half of what’s being sought nearly a decade later.

All3 will officially return to the sales block next month, with the shape of the deal still to be ironed out. Given its current shareholding structure, one option beyond an outright sale would be for cable giant Liberty Global to retain a stake, with WBD exiting to trim its own considerable debt pile. WBD would still have a sizeable international production business and owns several valuable UK-based producers such as First Dates producer Twenty Twenty, The Repair Shop maker Ricochet and Who Do You Think You Are prodco Wall to Wall.

All3, which has around 50 production labels including many in the U.S., has been under WBD (then Discovery) and Liberty Global’s control for nearly a decade after selling to the U.S. media giants back in 2014. The company is run by CEO Jane Turton out of its Central London HQ, has a production operation in the U.S. and houses respected sales arm All3Media International.

All3Media declined to comment.

Additional reporting by Jake Kanter.