Netflix Bows Out After Paramount Offers Higher Bid for Warner Bros. Discovery

By mintory
Netflix Bows Out After Paramount Offers Higher Bid for Warner Bros. Discovery

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Paramount's Hostile Bid Threatens Netflix's Warner Bros. Acquisition

Netflix's attempt to acquire Warner Bros. is facing a significant challenge as Paramount launches a hostile takeover bid for Warner Bros. Discovery. This move could disrupt the existing agreement between Netflix and Warner Bros. Discovery, potentially reshaping the media landscape.

Paramount's Superior Proposal

Warner Bros. Discovery has determined that Paramount's hostile takeover bid constitutes a "Company Superior Proposal." This stems from Paramount's increased offer of $31 in cash per share, exceeding Netflix's $27.75 per share bid. The deal includes a ticketing fee of $0.25 per share per quarter if delayed beyond September 30, 2026, or a $7 billion termination fee should regulators block the deal. Warner Bros. Discovery would also need to pay Netflix a $2.8 billion termination fee, which Paramount is willing to cover.

Netflix Declines to Match Offer Immediately

Upon receiving notification of Paramount's superior offer, Netflix had four business days to raise its bid. However, Netflix declined to do so on the same day, paving the way for Paramount to potentially acquire Warner Bros. Discovery.

Financial Backing and Structure of Paramount's Offer

Paramount's offer includes a commitment from Oracle co-founder and CTO Larry Ellison and an associated trust to contribute equity funding toward Warner Bros. Discovery's debt. The Ellison Trust and Larry Ellison are committing $45.7 billion to support the solvency certificate required by Paramount's lending banks. Bank of America Merrill Lynch, Citi, and Apollo are providing a $57.5 billion debt commitment. Paramount also proposed a “Company Material Adverse Effect” definition that excludes the performance of Warner Bros. Discovery's Global Linear Networks segment.

Paramount's Initial Hostile Bid

Paramount's initial hostile takeover bid was made on December 8, shortly after Netflix and Warner Bros. Discovery entered into their definitive agreement. Paramount offered $30 per Warner Bros. Discovery share, aiming to appeal to shareholders with a higher price than Netflix's offer. Unlike Netflix, which sought to acquire Warner Bros. after a planned split, Paramount intends to acquire Warner Bros. Discovery as a whole.

Paramount's Media Holdings

Paramount owns several streaming services and television channels, including Paramount+, Pluto TV, CBS, Nickelodeon, Comedy Central, MTV, and Showtime. Paramount+ is planning a price increase in January 2026, with ad-supported plans rising to $8.99 and ad-free plans to $13.99.

Netflix's Earlier Agreement with Warner Bros. Discovery

Netflix and Warner Bros. Discovery had previously entered into a definitive agreement on December 5 for Netflix to acquire Warner Bros. This deal was contingent upon Warner Bros. Discovery's split into Warner Bros. and Discovery Global, expected to be completed in Q3 2026. The transaction also required regulatory approvals, shareholder approval, and other closing conditions.

Details of Netflix's Original Offer

Netflix offered $27.75 per Warner Bros. Discovery share, valuing the equity at approximately $72.0 billion and the total enterprise at $82.7 billion. Warner Bros. Discovery shareholders would have received $23.25 in cash and $4.50 in Netflix common stock for each share.

Background to the Acquisition Attempts

Reuters reported that Netflix entered exclusive talks with Warner Bros. Discovery on December 5. Prior to this, Netflix, Paramount Skydance, and Comcast submitted preliminary buyout proposals. Bloomberg reported that Netflix offered a $5 billion breakup fee if regulators blocked the deal. The Directors Guild of America also planned to meet with Netflix to discuss concerns regarding the potential acquisition.

Warner Bros. Discovery's Strategic Review

Warner Bros. Discovery announced on October 21 that it was evaluating the possible acquisition of the entire company or separate acquisitions for Warner Bros. and Discovery Global. This review was initiated to maximize shareholder value. The company had received "unsolicited interest" from multiple parties and left open the possibility of an alternative separation structure.

Previous Interest from Paramount Skydance

The Wall Street Journal reported that Paramount Skydance was evaluating a possible acquisition of Warner Bros. Discovery in September. Bloomberg reported that Warner Bros. Discovery rejected an offer from Paramount Skydance for $20 per share in October. Deadline reported that Paramount insisted the rival offers from Netflix and Comcast presented serious regulatory issues.

Warner Bros. Discovery's Planned Split

Warner Bros. Discovery announced its intent to split into two separate publicly traded companies, Warner Bros. and Discovery Global, on June 9. Warner Bros. would own Warner Bros. Television, Warner Bros. Motion Picture Group, DC Studios, HBO, HBO Max, and Warner Bros. Gaming Studios. Discovery Global would own CNN, TNT Sports in the U.S., and Discovery.

Formation of Warner Bros. Discovery

Warner Bros. Discovery was formed after AT&T spun off its WarnerMedia business and merged it with Discovery. This process began in 2021 and completed the following year.

Warner Bros. Japan's Role in Anime

Warner Bros. Discovery owns Warner Bros. Japan, a production company involved in numerous anime properties. Warner Bros. Japan has produced over 80 anime titles, including popular series like Is It Wrong to Try to Pick Up Girls in a Dungeon?, Food Wars! Shokugeki no Soma, JoJo's Bizarre Adventure, Record of Ragnarok, and SPY x FAMILY. The company also handles overseas and domestic live-action film productions of Japanese properties. Warner Bros. Japan plans to increase its annual anime output from five to 10 titles to over 10.

Streaming Content on HBO Max

HBO Max offers content from various sources, including GKIDS' "entire Studio Ghibli film library." At launch, Crunchyroll, Cartoon Network, Adult Swim, and Rooster Teeth also offered content through the service. HBO Max has increased its subscription prices multiple times since its launch.

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