Netflix Warner Bros takeover: Paramount counters Netflix with hostile bid for Warner Bros

Paramount has countered Netflix with a cash bid for Warner Bros Discovery. Photo / Valerie Macon, AFP

Paramount has launched an all-cash tender offer to acquire Warner Bros Discovery, the Hollywood giant that also owns CNN, in a challenge to Netflix’s own highly contested deal.

The hostile offer sets up a bidding war between streaming behemoth Netflix and Paramount – whose CEO is David Ellison, the son of Larry Ellison, one of the world’s richest people and an ally of US President Donald Trump.

Netflix shocked the industry last week by announcing it had sealed an agreement to buy the Warner Bros studio, drawing bitter reactions from voices in Hollywood worried about the future of their industry.

David Ellison’s father Larry Ellison has put up the cash to pay for the buyout, with sovereign wealth companies from Saudi Arabia, Qatar and Abu Dhabi also investors.

Another investor is Affinity Partners, the private equity firm founded by Trump’s son-in-law Jared Kushner, who is close to the President and acted on his behalf in recent diplomatic missions on the wars in Gaza and Ukraine.

Trump weighed in, saying Netflix’s deal “could be a problem” as it would be left with a huge market share of the film and TV industry.

In a break from usual practice, Trump said he would be “involved” in the Government’s decision to approve the deal over fair competition concerns, instead of leaving the question solely in the hands of the Department of Justice or Federal Trade Commission, as is usually the case.

“We’re really here to finish what we started,” David Ellison, who is also chairman of Paramount, told CNBC as his company made a sixth offer for Warner Bros since a bidding war began in September.

Unlike Netflix’s offer, Paramount’s latest bid includes the buyout of cable channels such as CNN, TNT, TBS and Discovery – which would be added to its group of TV assets like CBS, MTV and Comedy Central.

The offer values the entertainment giant at US$108.4 billion ($187.6b) and represents a 139% premium over Warner Bros Discovery’s (WBD) September stock price of US$12.54, when the bidding war began.

Paramount in a statement called Netflix’s bid, which values WBD at nearly US$83b, “inferior and uncertain”.

“WBD shareholders deserve an opportunity to consider our superior all-cash offer,” David Ellison said.

Netflix declined a request for comment from AFP.

‘Far from over’

“The Warner Bros Discovery acquisition is far from over,” Emarketer analyst Ross Benes said.

“Netflix is in the driver’s seat but there will be twists and turns before the finish line ... The battle could become prolonged.”

Over the decades, Warner Bros has produced film classics including Casablanca and Citizen Kane, as well as more recent blockbuster shows including Friends, Game of Thrones and the Harry Potter movies.

Paramount argued its deal provides greater regulatory certainty than the Netflix transaction, which it said would give Netflix a 43% share of global streaming subscribers and face “protracted regulatory challenges across the world”.

The combined company would unite Paramount’s portfolio – including Paramount Pictures, CBS, Nickelodeon and streaming site Paramount+ – with WBD’s assets, including HBO Max and major sports rights.

Paramount said the merger would generate over US$6b in cost savings while maintaining theatrical releases and increasing content spending.

Keeping movies in theatres is a very sensitive issue for the creative industry in Hollywood.

Netflix is already viewed negatively in some Hollywood circles, largely because of its reluctance to release content in theatres and its disruption of the industry.

Many veterans consider theatrical releases essential to cinema’s appeal and prestige and also integral to maintaining Hollywood jobs and a vibrant economy.

Warner Bros Discovery’s share price skyrocketed by more than 7% on Monday (local time) while shares in Netflix fell by over 3%.

– Agence France-Presse