After Netflix agreed to merge with Warner Bros. Discovery earlier in December (pending approval), Paramount made a “hostile” bid that WB rejected due to “significant risks.”
Earlier this month, Netflix dropped a bombshell by agreeing to acquire Warner Bros. Discovery’s TV, film, and streaming division (including HBO Max and HBO) for $72 billion. Netflix co-CEO Ted Sarandos celebrated the agreement, saying the company’s mission is to “entertain the world” despite antitrust scrutiny.
While the offer is still pending, Paramount made a “hostile” bid, raising Netflix’s existing offer for WB to $108 billion. This raised the per-share buyout price from nearly $28 to $30, in a deal that appears more favourable to WB’s shareholders. Today, WB has rejected the offer, citing “significant risks” and persistent misrepresentation of the $ 30-per-share figure, finding the offer “inferior” to Netflix’s (according to Reuters). Before the $108B bid, Paramount had previously made a reported six bids to acquire WB before WB accepted Netflix’s offer.
Paramount’s offer is reportedly backed by the Ellison family trust, which Paramount claims has more than $250 billion in assets. This is more capital than needed to cover the bid; however, Warner Bros. Discovery noted Paramount’s intricate business structure as it currently stands. The Ellison Revocable Trust is providing just 32% of the required equity commitment while capping its liability at $2.8 billion for the Warner Bros purchase (on a $108B bid). Apparently, it noted that the trust’s assets could be withdrawn at any time, making the Ellison trust liability akin to zero. The Warner Bros. Board said, “A revocable trust is no replacement for a secured commitment by a controlling shareholder.”
On the other hand, Netflix’s offer is backed by a public company with a market cap in excess of $400 billion for the Warner Bros. Discovery catalogue, and Netflix has already committed to keeping the theatrical release model intact. It’s worth noting that just last year, Paramount faced a class-action lawsuit for layoffs without warning, displacing over 300 workers and failing to provide the 90-day notice required under the NY WARN Act.
Netflix has welcomed the counteroffer from Paramount, with co-CEO Sarandos stating plainly, “The Warner Bros Discovery Board reinforced that Netflix’s merger agreement is superior and that our acquisition is in the best interest of stockholders,” and so far, Warner Bros. has widely agreed. It’s also worth noting that Paramount was just purchased last year by Skydance for $8B, placing Larry Ellison as CEO of both companies and putting the value of the merged company at $28B as of the announcement. Over one year later, they’re offering $108B for Warner Bros.
While it appears Netflix is winning the race for Warner Bros., the merger remains pending. Warner Bros. has benefited from the bidding war, with its stock rising over 15% since Netflix’s offer.
