The Warner Bros. Discovery board on Wednesday recommended that shareholders reject a hostile takeover bid, valued at $108.4 billion, from Paramount Skydance for the entire media company and accept an agreement made earlier this month to let Netflix buy WBD’s studio and streaming business for $82.7 billion.
WBD Board of Directors Chair Samuel Di Piazza said its unanimous recommendation came after evaluating Paramount's bid and concluding “the offer’s value is inadequate, with significant risk and costs imposed" on WBD shareholders.
“The Ellison family has still not provided an equity backstop, despite headline claims,” stated a published letter sent by WBD’s board to shareholders regarding its recommendation to reject the Paramount offer.
“The Warner Bros. Discovery Board reinforced that Netflix’s merger agreement is superior and that our acquisition is in the best interest of stockholders,” said Ted Sarandos, Netflix co-CEO, in a statement. “This was a competitive process that delivered the best outcome for consumers, creators, stockholders and the broader entertainment industry. Netflix and Warner Bros. complement each other, and we’re excited to combine our strengths with their theatrical film division, world-class television studio, and the iconic HBO brand, which will continue to focus on prestige television. We’re also fully committed to releasing Warner Bros. films in theaters, with a traditional window, so audiences everywhere can enjoy them on the big screen.”
Even before Paramount’s hostile takeover attempt of Warner Bros. Discovery appeared to be in trouble this week, there existed a broader media-and-entertainment-business discussion as to the motives of Netflix.
Why would a forward-looking, pure-play streaming company like Netflix, which built a market capitalization more than twice as big as any rival media conglomerate — not through M&A but via organic growth strategy — want a 102-year-old Hollywood studio?
Some analysts have cynically argued that Netflix’s goals are defensive — regardless as to whether federal regulators eventually OK its $83 billion deal to buy WBD, the process alone will tie up a competitor in red tape for maybe several years, while keeping it out of Paramount’s hands all the while.
However, MoffettNathanson analyst Robert Fishman argues that the old saying, “the best offense is a good defense” applies to Netflix here.
The streaming company, he argues, isn’t playing from a defensive posture, whereby it “does not see as strong a path to growth without acquiring deeper libraries of premium-quality IP or preventing a strengthened competitor like PSKY from emerging.”
Rather, Netflix is playing offense, where it “simply wants (but doesn’t need) to win the assets to expand its dominance and accelerate its own growth profile through better monetization of Warner Bros. and HBO content.”
Put by Fishman another way, “Netflix is coming from a place of strength and opportunistically looking to acquire crown jewels of the media industry that were in large part forced to the selling block by an unsolicited bid from a sub-scale competitor.”
Understanding Netflix’s motives seems important, given that WBD shareholders haven’t yet made a choice on whether to abandon their deal with Netflix for a hostile bid from Paramount.
On Tuesday, Paramount Skydance’s bid, which values the entire WBD company at $108.4 billion, seemed to hit a roadblock, at least for now.
For starters, the Warner Bros. Discovery board recommended that shareholders reject Paramount’s all-cash offer of $30 per share for the entire entity and sign off on the board’s agreement with Netflix. Netflix had agreed to pay $27.75 a share for WBD studio and streaming assets not included in its global linear TV networks businesses, the latter which WBD plans to spin out as a separate company.
Notably, Affinity Partners, a private investment firm led by President Donald Trump’s son-in-law Jared Kushner, withdrew its financial backing of Paramount’s offer.
“The dynamics of the investment have changed significantly since we initially became involved in October. We continue to believe there is a strong strategic rationale for Paramount's offer,” reads an Affinity Partners statement.
Paramount’ bid also faced Congressional resistance Tuesday, with Sen. Elizabeth Warren (D-Mass.) and Sen. Richard Blumenthal (D-Conn.) pushing back on the legality of foreign investment funds from Saudi Arabia, Qatar and Abu Dhabi possibly owning a U.S. media giant. The Democratic senators want Treasury Secretary Scott Bessent to conduct a foreign investment committee review of the matter.
Further making the push for WBD by Paramount and CEO David Ellison challenging: President Trump complained Tuesday that his treatment by CBS news program 60 Minutes has gotten worse under Ellison’s ownership of the conglomerate. Ellison’s Skydance Media received a regulatory greenlight from the FCC for its $8 billion purchase of Paramount after Paramount’s CBS settled a lawsuit filed against it by Trump.
In its statement Wednesday morning, meanwhile, Netflix touted its bid as having better, safer financing channels. It also described its deal as more likely to gain approval from federal regulators.
Netflix included this graphic showing that, based on Nielsen data, a combined Netflix and WBD still account for less than 10% of U.S. TV consumption.
Still, on an antitrust level, Netflix would seem to have a tough road ahead of it. Already, Sens. Sen. Tim Scott (R-S.C.) and Sen. Mike Lee (R-Utah) have expressed doubts as to whether the deal will stand up to necessary competition standards.
Article updated with statement from Paramount on WBD's board recommendation.