Why has Paramount launched a hostile bid for Warner Bros Discovery?

The fight in Hollywood to buy Warner Bros. Discovery promises to be a blockbuster.

Paramount Skydance, backed by the billionaire Ellison family, has been courting Warner Bros for months, hoping to partner with the famous Hollywood name as the media company struggles to compete with Netflix and Disney.

So far, Warner Bros. has rejected his proposals. Then it announced a deal to sell the most valuable parts of its business – its studio and streaming divisions – to Netflix.

Undeterred, Paramount Chief Executive David Ellison launched a hostile takeover bid, speaking directly to shareholders.

In corporate transactions, a hostile takeover occurs when a company decides to acquire another company without the consent of the target company’s management, usually by offering to purchase its target’s stock.

This differs from a friendly takeover bid – one mutually agreed upon by the boards and shareholders of both companies.

Netflix’s proposal includes Warner Bros’ studios and streaming networks, leaving the rest of the company to become an independent company.

Its offer values ​​the holdings, which include brands such as Warner Bros, New Line Cinema and HBO Max, at $82.7 billion, including debt.

Netflix is ​​offering to pay $23.25 per share and give Warner Bros. an ownership stake in the new company – a mix of cash and equity that it says is worth about $27.75 per share.

Paramount, on the other hand, says it wants control of the entire company, including its traditional pay-TV networks, which are seen as a declining business.

His deal values ​​the entire company at $108.4 billion.

Paramount is offering to pay $30 per share, in an all-cash offer, which it says gives shareholders more certainty than Netflix’s plan.

In both cases, the expected completion date is several months away.

Warner Bros, whose roots go back about a century, has a vast library of content, ranging from classics like Looney Tunes and Casablanca to Friends, Superman and Harry Potter. Its HBO division is known for its “prestige” television shows, including The Sopranos, Sex and the City and Succession.

But the company is under pressure as online streaming has disrupted the film and television industries.

For Netflix, the streaming industry’s largest player with more than 300 million customers, buying the movies and streaming division would strengthen its movie offerings, while keeping out any potential rivals looking to get their hands on Warner Bros. content.

Paramount, on the other hand, is looking for a partner that will give it the scale to compete with industry giants such as Netflix and Disney.

A buyout would build on Mr. Ellison’s purchase of Paramount, which he integrated into his Skydance film studio over the summer.

On the streaming side, it’s looking to add HBO Max’s roughly 120 million streaming customers to Paramount’s 79 million.

Analysts say a tie-up could also offer benefits to struggling traditional pay-TV networks, giving them more leverage in business negotiations and providing cost-cutting opportunities.

Paramount’s traditional networks include brands such as Nickelodeon, CBS and Comedy Central, while Warner Bros. reportedly brings CNN, Food Network and a range of sports offerings.

Both deals raise competition concerns and are expected to face scrutiny from U.S. and European regulators.

Netflix’s plan has sparked warnings that it would give streaming’s dominant player even more power over actors and writers, while putting additional pressure on local theaters.

But a Paramount-Warner Bros merger would also leave it with control of a significant share of sports and children’s entertainment, raising potential concerns for advertisers and local TV distributors.

Paramount’s plans, which would put CBS and CNN under the same parent company, have also been closely watched because of their potential impact on the news industry and the Ellisons’ ties to Trump.

Analysts said approval would likely depend on how regulators decide to define the market and whether players like YouTube are considered part of the competition.

Netflix is ​​relatively new to making deals.

Some have also suggested that Paramount may be in a stronger position thanks to Trump’s relationships with the Ellison family, including tech billionaire and Republican megadonor Larry Ellison. Trump’s son-in-law, Jared Kushner, is also one of Paramount’s financial partners.

But Trump himself has offered little certainty about his views.

Although he has praised the Ellisons in the past, on social media Monday he took aim at their ownership of Paramount, sparked by a 60 Minutes interview the company aired with former Trump ally Marjorie Taylor Greene, a Republican representative.

Previously, he raised potential concerns about the Netflix tie-up, given the company’s size, while also praising the streamer’s bosses.

It’s not clear.

Neither Netflix nor Paramount have given much information on how they would integrate Warner Bros into their current offerings or take the opportunity to launch new types of streaming packages.

When it comes to pricing, increasing Netflix’s offerings could allow it to charge its customers more. But if viewers find out they’re paying for one streaming service rather than two, it could cost them less.

More than 70% of HBO Max customers in the United States also subscribe to Netflix, according to analysts at Raymond James.

Report written by Danielle Kaye