Paramount gatecrashes Warner Bros-Netflix deal with $108bn hostile bid

Paramount has launched a $108bn hostile bid to buy Warner Bros Discovery, partnering with Middle East sovereign wealth funds and Donald Trump’s son-in-law Jared Kushner to derail Netflix’s agreed deal.

The all-cash offer for the whole of WBD, including its studio, streaming and cable businesses, values the media group at $30 a share. Paramount said it was offering $18bn more in cash, with chief executive David Ellison criticising Netflix’s “inferior proposal”.

The Ellison family and RedBird Capital had committed to backstop the entire $40.7bn of equity capital required for the deal, Paramount said, adding that financing would also come from Saudi Arabia, Abu Dhabi and Qatar sovereign wealth funds as well as from Kushner’s Affinity Partners.

Following a three-month auction process, which was kicked off by Paramount’s initial bid for WBD, Netflix last week sealed an $82.7bn deal to buy the media giant’s studio assets behind Harry Potter and the DC Comics franchise, and its HBO Max streaming service.

WBD on Monday said its board would “carefully review and consider Paramount Skydance’s offer”, but said it was “not modifying its recommendation with respect to the agreement with Netflix”.

WBD’s shares rose 4.4 per cent higher on Monday, while Paramount jumped 9 per cent. Netflix shares fell 3.4 per cent.

Netflix’s deal, which would reshape Hollywood by putting a technology company at the helm of one of the most famous studios, had drawn the ire of powerful unions and the attention of the US president, who said on Sunday he would be involved in reviewing the transaction.

The agreement valued WBD’s studio and streaming assets at $27.75 a share, and excluded its cable assets such as Discovery and CNN, which it plans to spin off next year.

The cable business would be handed to existing WBD shareholders under Netflix’s deal, and could be valued at $4 a share, according to analysts’ estimates. Paramount’s proposal values the cable assets at $1 a share.

Paramount is seeking to win over WBD shareholders by fuelling doubt about Netflix’s ability to secure antitrust approval. The streaming company said it would need 12 to 18 months to win regulatory consent, which Paramount on Monday called an “unrealistic assumption”.

The strength of the rival bids will hinge on how WBD shareholders perceive the antitrust risk from each proposal, the potential value of its cable assets and the upside of owning Netflix stock. WBD shareholders have until January 8 to vote on Paramount’s tender offer but the deadline can be extended.

Ellison, son of billionaire Oracle founder Larry Ellison, on Monday said if Netflix was allowed to buy WBD, “there will be no more competition in Hollywood”. He added in an interview on CNBC that Trump would be supportive of the most competitive deal.

The president on Monday said: “I know the companies very well. I know what they’re doing, but I have to see. I have to see what percentage of [the] market they have.”

He added: “None of them are particularly great friends of mine. I want to do what is right, it’s very important to do what is right.”

Paramount said the Middle East funds and Kushner’s group had agreed to forgo governance rights — including board seats — and so their participation should not lead to the deal being reviewed on national security grounds. Bank of America, Citigroup and Apollo had provided $54bn of debt commitments, Paramount said.

Despite submitting six proposals over 12 weeks, Paramount argued WBD “never engaged meaningfully” with its offers. “Paramount has now taken its offer directly to WBD shareholders and its board of directors to ensure they have the opportunity to pursue this clearly superior alternative,” it added.

Netflix would continue to press ahead with its own deal for the studios and streaming parts of WBD, said people close to the talks.

Ted Sarandos, chief executive of Netflix, on Monday called the Paramount counter-offer “entirely expected”. 

“We’re super confident we’re going to get it across the line and finish,” he said at an investor conference arranged by UBS.

Sarandos also addressed concerns in Hollywood that Netflix, which has prioritised streaming original movies over distributing them in cinemas, would reduce the number of Warner Bros films released for the big screen. Had Netflix bought WBD earlier, it would have distributed to cinemas all of the hit films released this year, including A Minecraft Movie, Superman and Weapons, he said.

“We didn’t buy this company to destroy that value,” he said.

If WBD breaks off the agreement with Netflix, it may have to pay a $2.8bn break fee to the streamer.

One person familiar with the matter said the Paramount offer was the same as its final pitch during last week’s auction. This person added WBD did not respond to that approach.

WBD’s board had opted for Netflix late on Thursday on the basis that the movie-streaming giant’s bid offered greater certainty and was the most accommodating to the company’s demands.

“The board’s overriding priority more than valuation was choosing a bidder that could sign immediately, withstand regulatory scrutiny and close on the terms required,” said a person close to the company.

Additional reporting by Arash Massoudi in London, Christopher Grimes in Los Angeles, Alexandra White in New York and James Politi in Washington