Paramount Skydance Poised to Acquire Warner Bros Discovery as Netflix Withdraws Bid
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Paramount Skydance has emerged as the likely winner in a months-long battle to acquire Warner Bros Discovery. Streaming giant Netflix declined to raise its bid for the Hollywood studio.
Netflix stated, "We've always been disciplined, and at the price required to match Paramount Skydance's latest offer, the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid." Netflix confirmed it was withdrawing its bid for Warner Bros Discovery.
The Warner Bros board must still terminate the Netflix deal and adopt Paramount Skydance’s offer. Warner Chief Executive Officer David Zaslav said, "Once our board votes to adopt the Paramount merger agreement, it will create tremendous value for our shareholders."
He added, "We are excited about the potential of a combined Paramount Skydance and Warner Bros Discovery and can’t wait to get started working together telling the stories that move the world."
Paramount had pursued Warner Bros, launching a campaign to secure the acquisition. The company lured Warner Bros back to the bargaining table with the potential of an increased cash offer.
Warner Bros stated that Paramount’s revised $31-a-share offer was superior. This offer surpassed Netflix’s bid of $27.75 per share for Warner Bros’ streaming and studio assets.
An unnamed Netflix adviser recommended that the streaming service withdraw from bidding. The adviser said the deal no longer made economic sense.
Netflix Co-Chief Executive Officer Ted Sarandos hinted previously that the streaming giant would not substantially raise its offer in a February 20 interview with Fox News' Liz Claman. Mr. Sarandos emphasised that Netflix has been "very disciplined buyers."
The adviser indicated Netflix was bidding against a billionaire willing to pay a price Netflix considered irrational. The source referred to billionaire Larry Ellison, co-founder, executive chairman, and chief technology officer of Oracle. Mr. Ellison is the father of Paramount Chief Executive Officer David Ellison.
Netflix shares increased by more than 10% after the company declined to raise its offer.
Paramount’s merger with Warner Bros would unite two major Hollywood studios, two streaming platforms (HBO Max and Paramount+), and two news operations (CNN and CBS).
The Ellisons have connections to President Donald Trump. The bid is likely to face antitrust scrutiny in Washington, foreign countries, and United States states, including California.
TD Cowen analysts stated that federal regulatory approval seems likely. However, they believe some state regulators, notably California Attorney General Rob Bonta, could challenge the deal. They also see potential for European regulators to weigh in.
Attorney General Bonta, a Democrat, previously indicated the state was examining both bids closely. States can sue to block deals, though the Department of Justice has the most resources for such actions.
Democratic Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal expressed concern that the deal’s approval could be influenced by political favouritism.
In its revised bid, Paramount increased the regulatory termination fee to $7 billion, up from $5.8 billion. Paramount also agreed to cover the USD 2.8 billion fee Warner Bros would owe Netflix for withdrawing from the merger agreement.
The Ellison Trust is committing USD 45.7 billion in equity, an increase from $43.6 billion previously. Larry Ellison backs this commitment and agreed to provide additional funds to meet Paramount’s bank solvency requirements, according to the firm.
Bank of America Merrill Lynch, Citi, and Apollo are providing USD 57.5 billion in debt financing. This is an increase from their earlier commitment of USD54 billion.
Activist investor Ancora Holdings, which owns a small stake in Warner Bros, welcomed the latest offer. Ancora had previously urged Warner Bros to engage more with Paramount.
Ancora stated, "Netflix's decision to not raise its offer of USD 27.5 , less likely net debt adjustments, has paved the way for shareholders to receive meaningfully more cash and a truly viable path to government approvals." The firm concluded, "This is a win-win for shareholders and the industry.”
Paramount Skydance has emerged as the likely acquirer of Warner Bros Discovery.
Netflix withdrew its bid, citing that Paramount Skydance’s higher offer was no longer financially attractive.
Paramount’s revised bid offers $31 per share, surpassing Netflix’s bid of $27.75 per share for Warner Bros’ assets.
Source: REUTERS
