Paramount counters Netflix with hostile bid for Warner Bros Discovery
Paramount has set the stage for a bidding war with Netflix. (Reuters)
In short:
Paramount has made an all-cash tender offer to acquire Warner Bros Discover, tabling $US30 a share.
The hostile bid sets the stage for a furious bidding war between Paramount — whose owner, Larry Ellison, is an ally of Donald Trump -and streaming giant Netflix, which announced a deal with Warner Bros last week.
Unlike Netflix's offer, Paramount's latest bid includes cable channels such as CNN, TNT, TBS and Discovery.
Paramount has made a hostile bid to acquire Warner Bros Discovery, setting up a furious bidding war with Netflix for the media giant.
The company has submitted a bid for $US30 ($45) per share, challenging the $108 billion deal between WBD and Netflix announced last week.
The offer paves the way for a battle between Paramount — whose owner, Larry Ellison, is an ally of Donald Trump — and streaming behemoth Netflix to buy one of Hollywood's most storied studios.
Netflix shocked the industry last week by announcing it had sealed an agreement to buy the Warner Bros studio, drawing bitter reactions from voices in Hollywood worried about the future of their industry.
Mr Trump weighed in on Sunday, saying Netflix's effort to acquire Warner Bros "could be a problem" as it would be left with a huge market share of the film and TV industry.
"We're really here to finish what we started," David Ellison, chairman and CEO of Paramount, told CNBC as his company made a sixth offer for Warner Bros since the bidding war began.
What is Paramount offering?
Paramount's bid includes all of Warner's business, including cable channels such as CNN, TNT, TBS and Discovery that Netflix does not want.
It argues its bid for the entirety of Warner Bros Discovery will give shareholders $18 billion more in cash and an easier path to regulatory approval.
The studio also said the deal would be in the best interest of the creative community, movie theatres and consumers, who would benefit from the enhanced competition.
"We believe our offer will create a stronger Hollywood," Mr Ellison said.
Over the decades, Warner Brothers has produced film classics including Casablanca and Citizen Kane as well as more recent blockbuster shows including The Sopranos, Game of Thrones and the Harry Potter movies.
The combined company would unite Paramount's portfolio — including Paramount Pictures, CBS, Nickelodeon and Paramount+ — with WBD's assets including HBO Max and major sports rights.
The offer values the entertainment giant at $US108.4 billion and represents a 139 per cent premium over WBD's September stock price of $US12.54, when the bidding war began.
Paramount said the merger would generate more than $US6 billion in cost savings while maintaining theatrical releases and increased content spending.
David Ellison said Warner Bros shareholders should get the chance to "consider our superior all-cash offer". (Reuters: Brendan McDermid)
Meanwhile, in a statement, the studio called Netflix's bid, which values Warner Bros studios at nearly $US83 billion, "inferior and uncertain."
"WBD shareholders deserve an opportunity to consider our superior all-cash offer," Mr Ellison said.
Is the Paramount deal controversial?
There are concerns the merger would put all the properties under the ownership of a company with close ties to the Trump administration.
Paramount's $30-per-share cash offer includes financing from Affinity Partners, the investment firm run by Jared Kushner, Mr Trump's son-in-law, and several Middle Eastern government-run investment funds, and is backstopped by the Ellison family.
Larry Ellison, the world's second-richest person, is the father of Paramount head David Ellison and has close ties to the White House.
Analysts also noted that Paramount's offer came with its own antitrust scrutiny as a consolidation of two major television operators.
Last month, Democratic senators warned that such a transaction would result in "one company controlling almost everything Americans watch on TV".
The combined studio would also have a greater market share than current leader Disney DIS.N, and add to fears of consolidation that have hit the industry in recent years.
On Monday, Mr Trump said neither bidding party "are friends of mine," and he wanted "to do what's right".
What about the Netflix merger?
Keeping movies in theatres is a very sensitive issue for the creative industry in Hollywood.
Netflix is already viewed negatively in some Hollywood circles, largely due to its reluctance to release content in theatres and its disruption of traditional industry practices.
Many industry veterans consider theatrical releases essential to cinema's appeal and prestige, and also integral to keeping a healthy Hollywood economy.
Titanic director James Cameron called the buyout a "disaster," while a group of prominent producers lobbied US Congress to oppose the deal, according to trade magazine Variety.
In a letter to lawmakers, an anonymous group of filmmakers warned that Netflix would "effectively hold a noose around the theatrical marketplace", further damaging a Hollywood ecosystem already strained by audiences' shift from theatres and TV to streaming.
Warner Bros Discovery's share price skyrocketed by more than 7 per cent on Monday, while shares in Netflix fell by more than 2 per cent.
AFP/Reuters/AP