Warner Brothers Exploration (WBD) board’s inclination towards a $72 billion deal with Netflix, Paramount has launched a direct all-cash acquisition offer worth $108.4 billion to WBD shareholders, highlighting its advantages in terms of anti-monopoly and theatrical films.
The American entertainment media industry is currently embroiled in a merger and acquisition battle that could potentially reshape Hollywood’s landscape. Last Friday (December 5th), streaming giant Netflix announced that it had reached a preliminary agreement with WBD to acquire Warner Bros Discovery and its streaming assets (including Warner Bros and HBO Max) at a price of $72 billion. This deal marks Netflix’s largest acquisition to date and is expected to reshape the industry.
However, this deal was immediately met with strong opposition from competitors Paramount and its CEO David Ellison. Ellison directly made a competitive acquisition invitation to WBD shareholders on Monday (December 8th), attempting to escalate the merger battle by bypassing the board of directors.
While the WBD board was previously leaning towards Netflix’s deal, Paramount emphasized the superiority of its offer to shareholders:
Ellison insisted that in Wall Street, “cash is still king.” He emphasized that the all-cash offer exceeds Netflix’s deal by an additional $17.6 billion in cash, providing a more certain and faster path to completion. Netflix, on the other hand, claimed its advantage in that the remaining cable network assets of WBD, after the split, would bring higher overall returns for shareholders.
Ellison told CNBC on Monday, “WBD shareholders should have the opportunity to consider our superior all-cash bid for the entire company’s shares. We believe the WBD board is pursuing a second-rate proposal.”
As a long-standing Hollywood studio and media group, Paramount is shifting the debate towards regulatory risks and industry ecology.
Ellison pointed out to CNBC that Netflix’s offer would combine the world’s number one streaming service (Netflix) with the third-ranked streaming service (HBO Max). He warned that this combination would unsettle antitrust authorities, constituting “anti-competitive” behavior, thereby increasing Paramount’s chances of acquiring approval.
US President Trump expressed concern on Sunday (December 7th) that the Netflix acquisition of Warner Bros Discovery company “might be a problem,” worried about the antitrust issues that this acquisition might trigger.
In October 2016, then presidential candidate Trump publicly opposed the merger between AT&T and Time Warner, stating that it would lead to “excessive concentration of power in the hands of a few.”
Furthermore, Ellison appealed to industry sentiments, warning that the Netflix-WBD deal would signify the “end of the Hollywood theatrical film business,” as it would place Warner Bros, a crucial studio, under the control of a purely streaming company. He emphasized to CNBC that this would be “detrimental to consumers, detrimental to the creative community,” and stated that Paramount is working to preserve the traditional distribution system.
Netflix’s Co-CEO Greg Peters stated last Friday that this deal would enhance the content supply of the streaming platform over the “coming decades.”