Paramount Launches USD 108.4 Billion Hostile Bid for Warner Bros Discovery

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Paramount Skydance has launched a hostile bid valued at USD 108.4 billion for Warner Bros Discovery. The move is a last-ditch effort to outbid Netflix and create a media powerhouse. It aims to challenge the dominance of the streaming giant.

Netflix had emerged victorious from a weeks-long bidding war with Paramount and Comcast. The streaming company secured a USD 72 billion equity deal for Warner Bros Discovery's television, film studios, and streaming assets. Paramount's latest attempt means the jockeying for Warner Bros Discovery and its HBO and DC Comics assets will not conclude swiftly.

The Warner Bros Discovery Board of Directors said it would review Paramount's offer. However, it was not modifying its recommendation concerning Netflix. The board advised the company to "take no action at this time" regarding the Paramount Skydance proposal.

Paramount's USD 30-per-share cash offer includes financing from Affinity Partners, an investment firm run by U.S. President Donald Trump's son-in-law Jared Kushner. Several Middle Eastern government-run investment funds also provide backing. The Ellison family, including Larry Ellison, the world's second-richest person and father of Paramount head David Ellison, backstops the bid.

Credit: NETFLIX

Paramount argues its bid for the entirety of Warner Bros Discovery is superior to Netflix's. It states the offer gives shareholders USD 18 billion more in cash and an easier path to regulatory approval. Paramount CEO David Ellison said, "We believe our offer will create a stronger Hollywood."

Ellison separately stated that Paramount's proposal offers "higher headline value, increased certainty in that value, greater regulatory certainty, and a pro-Hollywood, pro-consumer and pro-competition future." A Paramount-Warner Bros combination would be among the largest media deals in history, benefiting the creative community, movie theatres, and consumers through enhanced competition.

Paramount's bid includes Warner Bros Discovery's cable television properties, unlike Netflix's bid, which is limited to the film and television studios, HBO, and the HBO Max streaming service. Analysts noted that Paramount's offer comes with its own antitrust scrutiny due to the consolidation of two major television operators.

Democratic senators have warned that such a transaction would result in "one company controlling almost everything Americans watch on TV." U.S. Senator Elizabeth Warren, a Democrat, stated a merger would be "a five-alarm antitrust fire and exactly what our anti-monopoly laws are written to prevent." She added the bid is "backed by a who's who of Trump buddies," raising questions about influence-peddling, political favouritism, and national security risks.

The combined studio would also have a greater market share than current leader Disney, adding to fears of consolidation that have hit the industry in recent years. The offer represents a 139% premium over the company's value from before the buyout talks started. It also surpasses Netflix's USD 27.75 offer, which mixes cash and stock.

In a regulatory filing, Paramount stated the Ellison family, which owns Paramount, along with private equity firm RedBird Capital, agreed to backstop USD 40.7 billion in equity capital. Financing for the offer also includes Kushner's Affinity Partners, the Saudi and Qatari sovereign wealth funds, and L'imad Holding Co, owned by the government of Abu Dhabi.

Netflix Co-Chief Executive Officer Ted Sarandos said Paramount's hostile bid for Warner Bros Discovery was "entirely expected." Sarandos added he was confident of closing the deal. Regarding Paramount's talks of USD 6 billion in synergies, Sarandos questioned, "Where do you think synergies come from? Cutting jobs? So we're not cutting jobs. We're making jobs."

If Warner Bros Discovery accepts Paramount's offer, it would have to pay Netflix a USD 2.8 billion breakup fee. Netflix, in turn, would be responsible for USD 5.8 billion if its deal falls through. The streaming pioneer's bid is likely to face strong antitrust scrutiny, and Trump has already raised questions about its offer.

Trump said neither bidding party "are friends of mine," adding he wanted "to do what's right." He also stated he had not spoken to Kushner about the Paramount bid. Netflix's bid has drawn sharp criticism from bipartisan lawmakers and Hollywood unions over concerns it could lead to job cuts and higher prices for consumers.

Chief Market Analyst at UK-based IG Group Chris Beauchamp said, "While it is perhaps a sad commentary on the U.S. that Paramount thinks its closeness to the occupant of the Oval Office will help it seal the deal, it is merely doing what it can to steal a march on its rival." Shares of Paramount rose 7.3%, while Warner Bros Discovery shares rose 5.3%. Netflix shares fell 4%.

eMarketer Senior Analyst Ross Benes said the "Warner Bros Discovery acquisition is far from over." Benes added that Paramount would appeal to shareholders, regulators, and politicians to try to stymie Netflix, suggesting the battle could become prolonged.

Paramount maintained it would champion Hollywood and its talent, remain committed to releasing movies in theatres, and that its path to regulatory approval would be faster than Netflix's. Paramount said it submitted six proposals over 12 weeks but Warner Bros Discovery "never engaged meaningfully" with these proposals.

The company sent a letter to Warner Bros Discovery, questioning the sale process. It alleged the company abandoned a fair bidding process and predetermined Netflix as the winner. This followed reports that Warner Bros Discovery's management called the Netflix deal a "slam dunk" while speaking negatively about Paramount's offer. In an interview, Paramount CEO Ellison said there was an "inherent bias" in the bidding.

Paramount Skydance launched a USD 108.4 billion hostile bid for Warner Bros Discovery, aiming to outbid Netflix.
Warner Bros Discovery's board will review the offer but is not changing its Netflix recommendation.
Paramount's offer, backed by Jared Kushner and Middle Eastern funds, includes USD 30-per-share cash.

Source: REUTERS