Paramount Raises Warner Bros Discovery Bid Amid Netflix Rivalry

Paramount Skydance has submitted a higher offer for Warner Bros Discovery, intensifying efforts to prevent the HBO Max owner from closing a deal with Netflix, a source familiar with the matter told Reuters on Monday. The revised bid aims to address Warner Bros concerns regarding financing certainty.

Credit: PARAMOUNT

The new proposal improved on Paramount’s initial offer of USD 108.4 billion, or USD 30 per share, for the entire company. Netflix had offered to acquire the studios and streaming assets for USD 82.7 billion, or USD 27.75 per share in cash.

This bidding war involves some of Hollywood’s most sought-after assets, including the "Harry Potter" and "Game of Thrones" franchises. The competition has escalated the stakes for dominance within the streaming-led market.

Warner Bros had previously rejected an enhanced bid from Paramount, made on February 10, that included paying a USD 2.8 billion termination fee to Netflix. This earlier offer also featured a USD 0.25 per share quarterly ticking fee, intended to compensate Warner Bros shareholders for any deal closure delays. Warner Bros stated the offer fell short of a superior proposal and gave a seven-day deadline until February 23 to submit a revised offer.

Netflix, the preferred suitor, is permitted to match the latest offer from David Ellison-led Paramount. Netflix possesses ample cash reserves to potentially increase its bid, while Oracle billionaire Larry Ellison backs Paramount’s rival offer.

MoffettNathanson analysts previously suggested a Paramount offer of approximately USD 34 per share would conclude the bidding war. Warner Bros intends to spin off cable television assets, such as CNN and HGTV, into Discovery Global.

Warner Bros estimates these assets could be worth between USD 1.33 and USD 6.86 per share. Netflix claimed its offer provides shareholders with added upside from the Discovery Global spinoff, arguing it will enhance the new company’s strategic, operational, and financial flexibility. Paramount, however, asserted the cable spinoff, central to Netflix’s offer, is effectively worthless.

Warner Bros, led by David Zaslav, faced pressure from activist investor Ancora Capital. Ancora Capital, which built a roughly USD 200 million stake, accused the company of insufficient engagement with Paramount.

The investor warned it would vote against the Netflix deal and hold the company’s board accountable at its annual meeting if Warner Bros refused to re-engage discussions with Paramount.

Warner Bros shareholders were set to decide the fate of Netflix's offer on March 20. A green light from investors would move the deal forward, but it would still face intense scrutiny from U.S. and European competition authorities, who must assess whether combining a global streaming power with a century-old studio would diminish competition or limit consumer choice. These bodies must assess whether combining a global streaming power with a century-old studio would diminish competition or limit consumer choice.

A bipartisan group of lawmakers has voiced concerns regarding potential harm to consumers and creative professionals. Paramount stated it has secured foreign investment clearance in Germany and is in discussions with antitrust regulators in the U.S., the European Union, and the UK. Paramount has consistently argued it has a clearer path to regulatory approval than Netflix.

Paramount’s bid would create a studio larger than market leader Disney and merge two significant television operators. Some Democratic senators believe this combination would control "almost everything Americans watch on TV."

The deal would also transfer control of CNN to the conservative-leaning Ellisons. They recently acquired CBS News and appointed Bari Weiss as its editor-in-chief.

For Netflix, a combination with HBO Max would establish it as the largest global streaming player, with approximately half a billion subscribers. Netflix co-CEO Ted Sarandos expressed confidence in securing approval.

Sarandos stated Netflix’s bid would benefit Hollywood by avoiding job cuts in an industry already affected by fewer productions and uneven box-office returns. Netflix also argued the potential combination would benefit consumers by lowering the cost of a bundled offering.

However, Netflix’s argument that it needs Warner Bros to compete with YouTube, America’s most-watched television distributor, is likely to face pushback from the Department of Justice. The U.S. Department of Justice is examining whether Netflix engaged in anti-competitive practice as part of its regulatory review. Netflix has cited Nielsen statistics indicating YouTube accounts for more U.S. television viewing time than other streaming services.

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• Paramount Skydance submitted an improved offer for Warner Bros Discovery, aiming to prevent Netflix from acquiring the company.

• The bidding war involves significant assets, with Paramount’s initial offer at USD 108.4 billion and Netflix’s at USD 82.7 billion.

• Both potential deals face extensive regulatory scrutiny from U.S., European Union, and UK competition authorities.

Source: REUTERS