Good day all. This one is a bit different. Currently, Warner Brothers Discovery is on the market. The other day, Netflix announced that they were buying Warner Brothers, which also includes HBO Max. However, there is a wrinkle in this deal.
It appears that Skydance/Paramount made several offers which was significantly more than what Netflix is offering. Initially, Warner responded saying they were interested but there were some details that they had issues with. Paramount addressed the issues and responded to Warner, and this is where the fun began. It appears that Warner’s management flat out ignored the offers. Now Paramount has announced that they are initiating a hostile takeover of Warner. Here are the details from Newsmax:
Paramount Skydance on Monday launched a hostile bid worth $108.4 billion for Warner Bros Discovery, challenging Netflix’s $72 billion takeover deal with the company announced just days ago.
That is a pile of cash for the shareholders. Now for some due diligence. I have shares in Warner. I received these when AT&T spun off Warner a few years ago.
Paramount said Monday that it is going straight to Warner Bros. shareholders with a $30 per share in cash offer for the entirety of Warner Bros. Discovery, including its Global Networks segment, asking them to reject the deal with Netflix.
That is the same bid that Warner Brothers rejected in favor of the offer from Netflix in a merger that would alter the U.S. entertainment landscape.
This is where things get interesting. It’s beginning to look like that the board of directors wasn’t aware of the Paramount offer. I was just watching the WDWpro podcast when they broke a story on this hostile takeover.
Their sources are saying that the Warner management may have been caught off guard by Paramount Skydance’s offer. They had an internal company meeting scheduled and suddenly canceled it. Also, Paramount is offering a cash deal which will make AT&T very happy.
Paramount criticized the Netflix offer, saying it “exposes WBD shareholders to a protracted multi-jurisdictional regulatory clearance process with an uncertain outcome along with a complex and volatile mix of equity and cash.”
This is another sticky area for a Netflix acquisition. HBO Max is a major competitor to Netflix. This may trigger an antitrust issue. There is also the problem of product for movie theaters. Warner produces movies for theaters and once the runs are completed, puts them on HBO and also licenses them out. Netflix does not put anything into theaters. (This is, in my opinion, stupid. It would be another revenue stream for them)
President Trump has said he is interested in the Netflix deal, but has also said he sees a few problems. He won’t be making any decisions, pro or anti until experts have looked into it. You also have the usual suspects on the left saying that letting the Netflix deal go through will be bad. What is surprising is that it’s not just the left that is seeing issues. Here are a few details from Fox Business News:
Sen. Mike Lee, R-Utah, who chairs the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, announced that a hearing on the streaming giant’s $82.7 billion acquisition of Warner Bros. Discovery’s streaming and studio assets would be in the works, claiming the deal had “a lot of antitrust red flags.”
“Buckle up for an intense antitrust hearing in the Senate,” Lee said on X.
Sen. Elizabeth Warren, D-Mass., said it “looks like an anti-monopoly nightmare.”
“A Netflix-Warner Bros. would create one massive media giant with control of close to half of the streaming market. It could force you into higher prices, fewer choices over what and how you watch, and may put American workers at risk,” Warren wrote on X.
Normally, I ignore anything that Big Chief Sitting Bullshit has to say about anything, but in this case, like a broken clock, she may actually be correct. You also have all the Hollyweird types coming out in opposition.
The Writers Guild of America (WGA), a union representing writers in motion pictures, television, radio and more, issued a scathing statement against the proposed deal, saying “this merger must be blocked.”
“The world’s largest streaming company swallowing one of its biggest competitors is what antitrust laws were designed to prevent. The outcome would eliminate jobs, push down wages, worsen conditions for all entertainment workers, raise prices for consumers, and reduce the volume and diversity of content for all viewers,” WGA’s statement said.
Currently, the biggest issue for Hollywood is Artificial Intelligence and the Kalifornistan regulatory environment. More and more movies and TV shows are being made anywhere else but in Hollywood. However, it may be the Unions are on the right side, if for the wrong reasons.
Another problem for the Warner/Netflix deal is the actual deal. Paramount is offering a lot more money, it will be for cash and not one of these hokey cash and stock deals, and will include the entirety of the Warner Communications operation. Returning to Newsmax:
On Friday, December 5th, Netflix struck a deal to buy Warner Bros. Discovery, the Hollywood giant behind “Harry Potter” and HBO Max. The cash and stock deal is valued at $27.75 per Warner share, giving it a total enterprise value of $82.7 billion, including debt. The transaction is expected to close in the next 12 to 18 months, after Warner completes its previously announced separation of its cable operations. Not included in the deal are networks such as CNN and Discovery.
One thing that Paramount Skydance does want is CNN. That is a major difference between the Netflix offer and the paramount offer. CNN is in really bad shape. If Paramount Skydance takes over, it will also put Bari Weiss in charge of CNN. David Ellison, who owns Skydance and now Paramount, would love nothing better than to turn CNN back into what is once was. A global and trusted news network.
Now this is going into the Hostile Takeover world. It’s been a while since I saw one of these involving a major corporation. If the reports I’ve heard are accurate and Warner CEO either ignored or refused a superior offer from Paramount Skydance, this can open a major cam of worms for David Zaslav, up to and including potential fraud issues. (I see that as a very low priority.
Right now, the betting is on Paramount Skydance winning and Warner Communications coming under the Skydance corporate umbrella. From a shareholder’s viewpoint, it does look like the better deal. I expect that sometime in the next few months, I’ll get an email asking me to vote on the proposed acquisition. It will be interesting to see if it’s just a sale to Netflix, a sale to paramount or a choice between the two. I know how I will vote. No, I’m not going to tell you. In the meantime, stock up on popcorn.
Thatisall
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