Paramount's Hostile Bid for WBD Challenges Netflix Deal

Paramount Skydance has launched a hostile, all-cash bid of $108.4 billion to acquire Warner Bros. Discovery (WBD), directly challenging Netflix's earlier agreement to purchase the media conglomerate for $82.7 billion. This aggressive move reignites a high-stakes corporate takeover battle for one of Hollywood's most iconic studios.

Paramount's proposal goes directly to WBD shareholders with an all-cash tender offer of $30 per share. The company highlighted that its bid offers shareholders $18 billion more in cash compared to Netflix's deal, which was valued at $27.75 per share, comprising $23.25 in cash and $4.50 in Netflix stock. Paramount is going straight to WBD’s shareholders with this offer, days after Warner Bros. agreed to be acquired by Netflix.

A key differentiator in Paramount's offer is its scope: it seeks to acquire the entirety of Warner Bros. Discovery. In contrast, Netflix's agreement with WBD was limited to its Hollywood studios and streaming operations. Interestingly, CNBC reported that Paramount's current terms are largely identical to a previous offer that WBD's board rejected just a week prior.

In a statement, Paramount CEO David Ellison criticized the WBD board's initial acceptance of the Netflix deal.

"We believe the WBD Board of Directors is pursuing an inferior proposal which exposes shareholders to a mix of cash and stock, an uncertain future trading value of the Global Networks linear cable business and a challenging regulatory approval process," Ellison said in a statement.

Paramount's substantial offer is backed by equity financing from the Ellison family and private-equity firm RedBird Capital. This is further bolstered by $54 billion in debt commitments secured from major financial institutions including Bank of America, Citi, and Apollo.

Netflix had seemingly emerged victorious last Friday from a prior bidding war involving Paramount and Comcast. However, Paramount's unsolicited, hostile bid is poised to prolong the intense battle for control of Warner Bros. Discovery, a contest that has already spanned several months.

The proposed Netflix-WBD merger had already sparked significant antitrust concerns, given it would consolidate two of the most popular streaming platforms. Former President Donald Trump notably commented that such a deal "could be a problem" due to the combined entities' substantial market share. A potential acquisition of WBD by Paramount would likely face similar scrutiny from regulators.

Should the Netflix-WBD deal fail to materialize, Netflix has agreed to pay WBD a breakup fee of $5.8 billion. Conversely, if WBD backs out of the agreement, it would owe Netflix $2.8 billion. Netflix has not yet responded to requests for comment regarding Paramount's new bid.