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The battle for Warner Bros. Discovery is unfolding in Hollywood, promising a potentially transformative deal for the media landscape.
Paramount Skydance, backed by the Ellison family, has reportedly courted Warner Bros. for some time, seeking to combine forces with the iconic studio as Warner Bros. navigates the evolving competitive landscape dominated by Netflix and Disney.
Despite initial interest, Warner Bros. reportedly considered an alternative proposal: selling its studio and streaming assets to Netflix.
Undeterred, Paramount CEO David Ellison is pursuing a direct appeal to shareholders in what amounts to a hostile takeover bid.
A hostile takeover in corporate finance describes an acquisition attempt made without the consent of the target company’s management, often through a direct offer to purchase shares from existing shareholders.
This contrasts with a friendly takeover, which involves a mutually agreeable transaction approved by both companies’ boards of directors and shareholders.
Reportedly, Netflix’s proposal centers on acquiring Warner Bros.’ studio and streaming divisions, leaving the remaining assets as a separate entity.
The proposed offer values these assets, encompassing brands such as Warner Bros., New Line Cinema, and HBO Max, at $82.7 billion, inclusive of debt.
Netflix’s offer includes $23.25 per share in cash, combined with a stake in the new company. The streamer values this combination at $27.75 per share.
Paramount, conversely, aims to acquire the entire company, including its traditional pay-TV networks, facing challenges amid shifting consumer habits.
The Paramount offer values the entirety of Warner Bros. Discovery at $108.4 billion.
Paramount proposes an all-cash offer of $30 per share, arguing that this approach provides greater certainty for shareholders compared to Netflix’s plan.
Regardless of the outcome, any potential deal is expected to take many months to finalize.
Warner Bros., with a legacy spanning a century, boasts an extensive content library featuring iconic properties like Looney Tunes, Casablanca, Friends, Superman, and Harry Potter. Its HBO division is renowned for producing acclaimed prestige television series, including The Sopranos, Sex and the City, and Succession.
However, the company has encountered headwinds as the rise of online streaming disrupts traditional film and television models.
For Netflix, the dominant streaming platform with over 300 million subscribers, acquiring Warner Bros.’ film and streaming assets would significantly strengthen its content library and potentially prevent competitors from gaining access to Warner Bros.’ valuable intellectual property.
Paramount, on the other hand, seeks a strategic partner to gain the scale necessary to effectively compete with industry giants such as Netflix and Disney.
A takeover would expand upon Mr. Ellison’s acquisition of Paramount, which he integrated into his Skydance film studio earlier this year.
In the streaming space, such a merger would combine HBO Max’s approximately 120 million subscribers with Paramount’s 79 million.
Analysts note that a combination could also benefit struggling traditional pay-TV networks by increasing bargaining power and creating opportunities for cost reductions.
Paramount’s established networks include brands like Nickelodeon, CBS, and Comedy Central, while Warner Bros. brings CNN, the Food Network, and various sports offerings to the table.
Both potential transactions would likely raise antitrust concerns and face scrutiny from regulators in the US and Europe.
The Netflix plan has elicited warnings about the dominant streaming player consolidating power, potentially impacting actors, screenwriters, and local cinemas.
A combined Paramount-Warner Bros. would control a significant share of sports and children’s entertainment, raising potential concerns for advertisers and local television distributors.
Paramount’s proposed integration of CBS and CNN under the same ownership is also under scrutiny for potential impacts on the news industry and the Ellisons’ connections to former President Trump.
Analysts suggest regulatory approval will hinge on the breadth of the market definition and whether platforms like YouTube are considered part of the competitive landscape.
Netflix is a relative newcomer to large-scale mergers and acquisitions.
Some have further suggested that Paramount could be in a stronger position thanks to the relationship between Trump and the Ellison family, including tech billionaire and Republican megadonor Larry Ellison. Trump’s son-in-law, Jared Kushner, is also one of Paramount’s financial partners.
However, Trump himself has offered little certainty about his views.
Though he has praised the Ellisons in the past, on social media on Monday, he took aim at their ownership of Paramount, triggered by a 60 Minutes interview that the company aired with former Trump ally Marjorie Taylor Greene, a Republican representative.
Previously, he had noted potential concerns about Netflix’s tie-up, given the size of the company, while also praising the streamer’s bosses.
It’s not clear.
Neither Netflix nor Paramount have offered much insight into how they would incorporate Warner Bros into their current offerings or seize the opportunity to launch new kinds of streaming packages.
When it comes to prices, boosting Netflix’s offerings could allow it to charge customers more. But if viewers find they are paying for one streaming service rather than two, it could cost them less.
More than 70% of HBO Max customers in the US also subscribe to Netflix, according to analysts at Raymond James.
Reporting contributed by Danielle Kaye
It might seem like a simple merger deal, but it’s got all the ingredients of a Hollywood drama.
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