Written by Harshita Mary Varghese, Aditya Soni, Dawn Chmielewski
Dec 8 (Reuters) – Paramount Skydance on Monday launched a hostile bid for Warner Bros. Discovery worth $108.4 billion. This is a last-ditch effort to outbid Netflix and create a media powerhouse to challenge the streaming giant’s dominance.
Netflix won a weeks-long bidding war with Paramount and Comcast on Friday, securing a $72 billion stock deal for Warner Bros. Discovery’s television, film studio and streaming assets. But Paramount’s latest move means that the partnership with Warner Bros. and its prized HBO and DC Comics properties won’t be concluded any time soon.
Warner Bros. Discovery’s board announced Monday afternoon that it would consider Paramount’s proposal, but did not change its recommendation regarding Netflix. It recommended that the company “take no action at this time” regarding the Paramount Skydance proposal.
Paramount’s $30-per-share cash offer includes financing from Affinity Partners, an investment firm run by President Donald Trump’s son-in-law Jared Kushner and several Middle East government-run investment funds, and backed by the Ellison family. Larry Ellison, the second richest person in the world, is the father of Paramount chief David Ellison and has close ties to the White House.
After the Netflix partnership was announced, Larry Ellison called Trump and told him the deal would hurt competition, the Wall Street Journal reported, citing White House officials and people familiar with the matter.
The studio claims its bid for the entire Warner Bros. Discovery outperforms Netflix, giving shareholders more than $18 billion in cash and an easier path to regulatory approval. The newspaper said the Paramount-Warner Bros. merger would be one of the largest media deals in history and would be in the best interest of the creative community, movie theaters and consumers who would benefit from increased competition.
“We believe our proposal will create a stronger Hollywood,” Paramount CEO David Ellison said in a statement. Separately, he said Paramount’s offer offers “a higher headline value, greater certainty of that value, greater regulatory certainty, and a pro-Hollywood, pro-consumer, pro-competitive future.”
Paramount’s bid also includes Warner Bros. Discovery’s cable television assets. Netflix’s bid is limited to Warner Bros. movie and television studios, HBO, and streaming service HBO Max.
Analysts said Paramount’s proposal would come with its own antitrust oversight as a combination of two major TV operators. Last month, Democratic senators warned that such a deal would “lead to one company controlling nearly everything Americans watch on television.” The combined studio would also have a larger market share than current leader Disney, adding to the consolidation concerns that have gripped the industry in recent years.
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This offer represents a 139% premium over the company’s value before acquisition negotiations began, and exceeds Netflix’s offer of $27.75 in cash and stock.
Saudi Arabia’s Kushner joins Paramount offer
Netflix co-CEO Ted Sarandos told a UBS briefing that Paramount’s hostile takeover of Warner Bros. was “fully expected,” but added that he was confident the deal would go through.
“In the offer that Paramount was talking about today, the Ellisons were talking about $6 billion in synergies,” Sarandos said. “Where do you think the synergies will come from? Job reductions? So we’re not cutting jobs. We’re creating jobs.”
Paramount said in a regulatory filing that the Ellison family, which owns Paramount, and private equity firm Redbird Capital have agreed to backstop $40.7 billion in equity. The proposal also includes financing from Mr. Kushner’s Affinity Partners, Saudi and Qatari sovereign wealth funds, and Limad Holding Company, owned by the Abu Dhabi government.
Democratic Sen. Elizabeth Warren said Monday that “the merger of Paramount Skydance and Warner Bros. is a five-alarm antitrust violation and exactly what our antitrust laws protect against.” This hostile bid is “supported by the persona of Mr. Trump’s friends and raises serious questions about influence misappropriation, political favoritism, and national security risks.”
If Warner Bros. accepts Paramount’s offer, it would have to pay Netflix a breakup fee of $2.8 billion. Netflix will be required to pay $5.8 billion in damages if the deal falls through. The streaming pioneer is likely to face increased antitrust scrutiny, and President Trump has already expressed doubts about the proposal.
President Trump said Monday that neither bidding party is “my friend” and that he “want to do the right thing.” He added that he had not spoken to Mr. Kushner about the Paramount bid.
Netflix’s bid has already drawn harsh criticism from bipartisan lawmakers and Hollywood unions over concerns it could lead to job cuts and higher consumer prices.
“It may be a sad comment for the US that Paramount thinks its closeness with the Oval Office occupier will help it get a deal done, but it’s just doing everything it can to steal a march on its rivals,” said Chris Beecham, chief market analyst at UK-based IG Group.
Paramount stock rose 7.3% on Monday. Warner Bros. Discovery rose 5.3%, while Netflix stock fell 4%.
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Reuters previously reported, citing sources familiar with the matter, that Paramount had raised its offer for the entire company to $30 a share on Thursday, but Warner Bros.’s board had concerns about raising the money.
“Warner Bros.’ Discovery acquisition is far from over,” said Ross Venez, senior analyst at eMarketer. “Paramount will try to block Netflix by appealing to shareholders, regulators and politicians. The battle could be long.”
Paramount said it is a champion of Hollywood and its talent, remains committed to releasing movies in theaters, and has a faster path to regulatory approval than Netflix. In its appeal to shareholders, Paramount said it had submitted six proposals in a 12-week period, but that Warner Bros. “never meaningfully engaged” with these proposals.
The company said it had sent a letter to Warner Bros. questioning the sale process, alleging that the company had waived a fair bidding process and decided on Netflix as the winner.
This was followed by reports that Warner Bros. executives spoke negatively about Paramount’s offer, calling the Netflix deal a “slam dunk.”
David Ellison said in an interview with CNBC on Monday that there was “inherent bias” in the bid.
(Reporting by Dawn Chmielewski in Los Angeles, Harshita Mary Varghese and Aditya Soni in Bengaluru; Additional reporting by Milana Vin and Jodi Godoy in New York and Jaspreet Singh in Bengaluru; Editing by David Gaffen, Arun Koyul and Nick Ziminski)
