:max_bytes(150000):strip_icc()/GettyImages-2250245865-0a257c755dfd4e4f9ed9e446b8785f02.jpg "The Netflix-Warner Bros. Deal Was Never Going to End Quietly. Now What?")
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Key Takeaways
- Days after Netflix announced plans to acquire Warner Bros., competing bidder Paramount Skydance has launched a hostile takeover offer.
- President Trump on Sunday said he’ll have a say. In the meantime, shares of all three companies are moving as investors recalculate the possibility of different outcomes.
Have your movie-night plans ever been blown up by too many choices and competing interests? That could be happening to the Netflix-Warner Bros. deal too.
Shortly after Netflix (NFLX) last week made its plans to acquire Warner Bros. (WBD) public, power players—up to and including President Donald Trump—made it clear that the industry-upending deal wouldn’t occur without their involvement. Netflix prevailed in a months-long bidding war for Warner Bros. assets, including its film and TV studios, its gaming business, HBO and HBOMax. But Paramount Skydance (PSKY) on Monday launched a hostile takeover attempt, saying the company’s shareholders should prefer its offer.
Meanwhile, Trump on Sunday said he would be “involved in the decision” and pointed to possible antitrust issues implied by the Netflix deal. To sum up the state of this media deal using the words of Warner Bros.’ iconic cartoon rabbit: “Of course, you realize this means war.”
WHY THIS MATTERS TO YOU
When deals between public companies are announced, their stocks generally start to move toward levels representing the value of the deal. In the case of Warner Bros. and Netflix, the magic number looks like a moving target.
The stakes are extremely high. When Netflix and Warner Bros. struck their $83 billion cash-and-stock deal, the pact came with sizable breakup fees. If the deal doesn’t go through because Warner Bros. walks away to pursue a different suitor, or because it fails to get shareholder approval, the company has to pay Netflix a fee equal to $2.8 billion. If the deal doesn’t go through because of antitrust laws or foreign regulatory laws, Netflix has to give Warner Bros. $5.8 billion.
Fees like those are generally larger when deals are big and the likelihood of turbulence is high. Paramount took its offer to Warner Bros. shareholders directly on Monday, saying its all-cash bid was superior to Netflix’s. “We’re really here to finish what we started,” Paramount CEO David Ellison said on CNBC . “We believe when they see what is currently in our offer, that that’s what they’ll vote for.”
At face value, Paramount’s $30-per-share offer, which Warner rejected, is higher than Netflix’s $27.75, but it also accounts for global television networks including CNN and TNT—pegging their value at mere dollars—whereas the streaming giant’s deal is contingent on the entertainment company splitting into two.
Ellison also took issue with the streaming monopoly that would be created with Netflix, the No. 1 streaming company combined with the third-largest Warner Bros., which he said would result in “unprecedented market power” that would exceed Disney (DIS). His deal, the CEO said, would have an “obviously faster path to regulatory certainty.”
Trump, who is a close friend of Larry Ellison, father to David, alluded to possible antitrust issues on Sunday, telling reporters that the market share implied by the Netflix-Warner deal “could be a problem.” Netflix co-CEO Ted Sarandos reportedly wooed Trump ahead of the deal’s announcement and had the impression that the White House wouldn’t block the transaction, according to Bloomberg.
In the meantime, traders are making some hay, a sign that the situation is seen as fluid. Warner Bros. stock was recently some 3%, rising to near $29 on Monday, while Paramount’s was up more than 8%. Netflix, meanwhile, was moving in the other direction, down more than 4%.
