Paramount Skydance makes $108B US hostile bid for Warner Bros. Discovery after Netflix move

Paramount Skydance on Monday launched a hostile bid worth $108.4 billion US for Warner Bros. Discovery, throwing a wrench into the deal with Netflix in a last-ditch effort to create a media powerhouse that would challenge the dominance of the streaming giant.

Netflix had seemingly emerged victorious on Friday from a weeks-long bidding war with Paramount and Comcast, securing a $72-billion US equity deal for Warner Bros. Discovery's TV, film studios and streaming assets. But Paramount's latest attempt means the jockeying for Warner Bros. and its prized assets HBO and DC Comics will not come to a conclusion swiftly.

The Warner Bros Discovery board of directors on Monday afternoon said it would review Paramount's offer, but is not modifying its recommendation with respect to Netflix. It advised the company to "take no action at this time" in regards to the Paramount Skydance proposal.

Netflix on Monday said it had no comment about Paramount's challenge. But on Friday, the company downplayed concerns that regulators would oppose a combination of Netflix and Warner's HBO Max streaming business.

Unlike Netflix, Paramount is also offering to buy the cable television assets of Warner Bros. It is the same bid that Warner Brothers had previously rejected in favour of the offer from Netflix. Paramount executives said their offer is worth about $18 billion US more than the competing bid from Netflix, which they said is based on an "illusory prospective valuation" of those cable assets.

"We believe our offer will create a stronger Hollywood," Paramount CEO David Ellison said in a statement. "We believe they will benefit from the enhanced competition, higher content spend and theatrical release output, and a greater number of movies in theatres as a result of our proposed transaction."

Citing sources familiar, Reuters had already reported that Paramount had raised its offer to $30 US per share on Thursday for the entire company, but that the Warner Bros. board had concerns about the financing.

In a regulatory filing, Paramount said the Ellison family, which owns Paramount, along with private equity firm RedBird, had agreed to backstop $40.7 billion US in equity capital.

The offer also includes financing from Affinity Partners, run by U.S. President Donald Trump's son-in-law, Jared Kushner, with other financing coming from the Saudi and Qatari sovereign wealth funds and L'imad Holding Co., owned by the government of Abu Dhabi.

Anti-trust concerns

Netflix's offer comes with a $5.8-billion US breakup fee and was likely to face strong anti-trust scrutiny.

U.S. President Trump told reporters on Sunday evening before an event at the Kennedy Center in Washington, D.C., that a Netflix-Warner Bros. combination could raise market share concerns for regulators. The bid has already drawn sharp criticism from bipartisan lawmakers and Hollywood unions over concerns that it could lead to job cuts as well as higher prices for consumers.

However, analysts noted that Paramount's offer comes with its own risks, including additional debt needed to make the transaction work. As well, the acquisition would bring its own anti-trust scrutiny as a consolidation of two major television operators. Last month, Democratic senators warned that such a transaction would result in "one company controlling almost everything Americans watch on TV."

The combined studio would also have a greater market share than current leader Walt Disney, and add to fears of consolidation that have hit the industry hard in recent years.

Paramount maintained that it would be a champion of Hollywood and its talent, would remain committed to releasing movies in theatres and that its path to regulatory approval would be faster than Netflix's.

What is a hostile takeover bid?

Paramount's offer was made in an unusual way. After Netflix and Warner Bros. jointly announced their deal on Friday, Paramount publicly revealed information around their own offer — an end-run business manoeuvre commonly known as a hostile takeover bid.

Such a move usually involves an unsolicited buyer acting against the explicit wishes of the company they intend to buy. Elon Musk engaged in such a move when he paid $43 billion US bid to acquire Twitter (now X). Similar to Paramount's offer, that deal was made against the apparent plans of Twitter's board of directors.

Pitching their proposition directly to Warner Bros. shareholders, Paramount sought to sway them against the deal put forward by the company's board of directors.

In its appeal, Paramount said it submitted six proposals over the course of 12 weeks, but Warner Bros. "never engaged meaningfully" with these proposals. The $30 US cash offer represents a 139 per cent premium over the company's undisturbed stock price, and bests Netflix's $27.75 US offer, which mixes cash and stock. 

"The Warner Bros. Discovery acquisition is far from over. Netflix is in the driver's seat but there will be twists and turns before the finish line. Paramount will appeal to shareholders, regulators and politicians to try to stymie Netflix. The battle could become prolonged," said eMarketer senior analyst Ross Benes. 

Paramount CEO Ellison defends bid

Paramount has argued the combination of its Paramount+ streaming service with Warner Bros.' HBO Max would position it for growth, and create a meaningful competitor to Netflix, Amazon Prime Video or Walt Disney's Disney+ — offering consumers more choice.

It had sent a letter to Warner Bros., questioning the sale process and alleging the company has abandoned a fair bidding process and predetermined Netflix as the winner.

That followed reports that Warner Bros.' management called the Netflix deal a "slam dunk" while speaking negatively about Paramount's offer.

In an interview with CNBC on Monday, Paramount CEO David Ellison said there is an "inherent bias" against his company in the bidding.

Some analysts and industry experts see Paramount as the best candidate for acquiring Warner Bros. Discovery, given Ellison's deep pockets — backed by his father, Oracle co-founder Larry Ellison, one of the world's richest people and someone with close ties to the White House.

Usha Haley, a Wichita State University professor who specializes in international business strategy, said Paramount's ties to Trump are notable.

"He said he's going to be involved in the decision. We should take him at face value," Haley said of Trump. "For him, it's just greater control over the media."

The bid for Warner Bros. comes on the heels of Paramount's October purchase of the news and commentary website the Free Press. Paramount then installed the site's founder, Bari Weiss, as the editor-in-chief of CBS News, saying the company believes the country longs for news that is balanced and fact-based.

It also follows Paramount's $8-billion US merger with Skydance, approved by the Federal Communications Commission in July. The approval process occurred after months of turmoil revolving around Trump's legal battle with 60 Minutes, the crown jewel of Paramount-owned broadcast network CBS. 

Earlier in July, Paramount agreed to pay a $16-million US settlement to the president. Critics of that settlement lambasted it as a veiled bribe to appease Trump, amid rising alarm over editorial independence overall.

Bloomberg News has reported Trump met Sarandos in mid-November, telling the executive Warner Bros. should sell to the highest bidder. In his CNBC interview on Monday, Ellison said he had "great conversations" with Trump, but did not characterize the discussions.

Looking to allay anti-trust fears, Sarandos had said the deal would drive value for consumers, shareholders and talent, saying Netflix is "highly confident" in the regulatory process.