Paramount challenges Netflix’s $72 bn Warner Bros proposal
Paramount has initiated a hostile takeover offer for Warner Bros Discovery, setting the stage for a potentially fierce confrontation with rival bidder Netflix to acquire the company that owns HBO, CNN, and a renowned movie studio, along with the ability to transform a significant portion of the nation’s entertainment landscape. Emerging just days after top Warner managers agreed to Netflix’s $72 billion purchase, Paramount’s Monday bid aims to bypass those leaders by appealing directly to Warner shareholders with a more lucrative offer – $77.9 billion — and a strategy to acquire all of Warner’s business, including the cable division that Netflix is not interested in. Paramount stated that its choice to pursue a hostile approach was prompted by multiple prior offers that Warner management “never engaged meaningfully” with after the company’s announcement in October indicating its willingness to consider a sale. In its appeal to shareholders, Paramount highlighted that its offer includes $18 billion more in cash than Netflix’s bid and contended that it is more likely to withstand scrutiny from President Donald Trump’s administration, a significant concern considering his tendency to involve himself in American business decisions. During the weekend, Trump remarked that the Netflix-Warner merger “could be a problem” due to the magnitude of the combined market share and indicated that he intended to personally review the deal.
Netflix expresses confidence that Warner will dismiss the Paramount bid, asserting that regulators, along with Trump, will support its deal. This assertion is backed by several discussions co-CEO Ted Sarandos has had with Trump regarding the streaming company’s growth and employment initiatives. “I believe the president’s interest in this aligns with ours, which is to create and safeguard jobs,” Sarandos stated on Monday during an investor conference. The battle over Warner elicited significant responses in Washington, as lawmakers from both major parties expressed their concerns regarding the potential effects on streaming costs, employment in movie theaters, and the variety of entertainment options and political perspectives available. Paramount, led by David Ellison, whose family maintains a close alliance with Trump, stated that it had presented six proposals to Warner over a span of 12 weeks prior to the most recent offer. “We believe our offer will create a stronger Hollywood. It is in the best interests of the creative community, consumers and the movie theatre industry,” the Paramount CEO said in a statement. Ellison stated that his agreement would foster increased competition within the industry, rather than diminish it, and result in a greater number of films being shown in theaters.
A regulatory document released on Monday indicated a potential additional advantage for Paramount in its efforts to win over Trump: An investment firm led by Jared Kushner, son-in-law of former President Trump, is also set to invest in the deal. Additionally, funds managed by the governments of three unnamed Persian Gulf nations are expected to participate, with widespread reports identifying them as Saudi Arabia, Abu Dhabi, and Qatar. Trump is unpredictable, often making decisions driven by instinct and his emotional state. On Monday, he expressed his frustration towards Paramount for permitting “60 Minutes” to interview his ally-turned-enemy Rep Marjorie Taylor Greene, stating on social media that “THEY ARE NO BETTER THAN THE OLD OWNERSHIP.” The situation regarding control of Warner escalated on Friday when Netflix unexpectedly revealed that it had reached an agreement with its management to acquire the Hollywood powerhouse responsible for “Harry Potter,” HBO Max, and DC Studios.
The cash and stock proposal was valued at USD 27.75 per Warner share, resulting in a total enterprise value of USD 82.7 billion, which includes the debt that will be assumed in the deal. In contrast, the Paramount proposal stands at USD 30 per Warner share, totaling USD 108 billion, inclusive of assumed debt. Paramount’s offer is scheduled to expire on January 8 unless an extension is granted. However, it is challenging to compare the two deals as they involve different purchases. The Netflix offer, should it proceed, will only finalize once Warner has completed its previously announced separation of its cable operations.
