Just hours prior to Warner Bros. Discovery consenting to sell its studio and streaming properties to Netflix, Ted Sarandos, the co-CEO of Netflix, reached out to WBD’s CEO David Zaslav to notify him that Netflix would not be increasing its bid.
WBD shareholders now have an opportunity to challenge Sarandos’ assertion.
WBD shareholders must act by Jan. 21 if they wish to submit their shares to Paramount for $30 in cash, although this timeline may be flexible. Paramount can prolong it right up until WBD’s upcoming annual meeting, which is still to be scheduled but occurred on June 2 this year.
Should Paramount secure 51% of the outstanding shares of WBD, it would assume control of the company, even if the WBD board has already consented to transfer the studio and streaming properties to Netflix. Over the forthcoming days and weeks, both Netflix and Paramount can engage with WBD shareholders to determine their preferences regarding Paramount’s offer versus the board’s recommendation to sell to Netflix.
To submit or not to submit, that remains the query. There are compelling cases on both sides. This choice also involves a strategic element for shareholders who might prefer a bidding conflict rather than fixating on the most suitable buyer.
To submit
There are two primary motives for a shareholder to tender their stakes to Paramount.
The first reason applies if the investor deems Paramount’s $30-per-share all-cash proposition for all of WBD is superior to Netflix’s $27.75-per-share offer limited to the Warner Bros. film studio and HBO Max streaming venture. The second reason reflects the belief that tendering shares could effectively initiate a bidding contest between Netflix and Paramount.
A shareholder might conclude that Paramount’s existing proposition is more advantageous than Netflix’s if they perceive it to have a greater probability of receiving regulatory approval, or if they believe Discovery Global — the collection of linear cable networks that includes CNN, TNT, Discovery, HGTV, and TBS, which is set for a separation — will have little value once publicly traded.
David Ellison, CEO of Paramount Skydance, mentioned to CNBC earlier this month that he estimates Discovery Global’s worth at $1 per share, based on his forecast of the likely multiple (two times earnings before interest, taxes, depreciation, and amortization) for its trading, tied to the current valuations of equivalent linear cable networks. If WBD opts not to cede the entire firm to Paramount, they plan to establish Discovery Global as an independent publicly traded entity in mid-2026.
Paramount contends that $30 per share already surpasses Netflix’s $27.75-per-share bid plus $1 per share for Discovery Global.
Paramount’s proposition is entirely in cash, while Netflix’s bid incorporates 16% equity with a so-called collar, implying that shareholders will be uncertain of the exact quantity of Netflix shares they will ultimately receive until the transaction finalizes.
Regarding regulatory approvals, Paramount has emphasized points asserting that a combined streaming venture of Netflix and HBO Max would be anti-competitive. Netflix boasts over 300 million paying subscribers worldwide. The prospect of the leading streamer acquiring HBO Max has already triggered apprehensions among politicians, including President Donald Trump, who mentioned potential “market share” concerns with a Netflix acquisition.
While Paramount would merge Paramount+ with HBO Max, Paramount+ currently has close to 80 million subscribers, posing a reduced risk to competition.
The second, more intricate rationale for submitting is to enhance potential benefits even if the assets eventually go to Netflix.
Ellison has previously acknowledged that Paramount’s $30-per-share offer isn’t the ultimate and final proposition. Tendering could encourage Netflix to present a higher offer, which might subsequently spur Paramount to elevate its bid too.
GAMCO Investors chairman and CEO Mario Gabelli stated to CNBC earlier this month that “the idea of Company A and Company B engaging in a bidding war — that’s what we appreciate as part of the free market framework.”
He added last week that while he was previously inclined to tender his shares to Paramount, “the most critical aspect is to maintain the competition.”
Not to submit
Conversely, some shareholders may feel that refraining from tendering is the optimal strategy to stimulate a bidding conflict. If Paramount observes fading shareholder interest as the annual meeting approaches, it might elevate its proposal to attract more shareholders.
There are further motivations to abstain from tendering. Shareholders might wish to retain the equity share in Netflix and Discovery Global that is part of Netflix’s offer.
In a WBD filing from the previous week, the company disclosed that an unidentified “Company C” suggested acquiring Discovery Global along with its 20% interest in WBD’s streaming and studios operations for $25 billion in cash. This proposal was dismissed by the WBD board as “not actionable.”
Nevertheless, this unidentified offer hints at the existence of a prospective buyer for all of Discovery Global should it be spun off, potentially yielding a value significantly higher than $1 per share, according to Rich Greenfield, an analyst at LightShed Partners. This reasoning strengthens the case against tendering, as it positions the Netflix offer as considerably more favorable than Paramount’s.
Furthermore, ensuring WBD separates Discovery Global emerges as the prudent choice for shareholders, should regulators impede a Paramount-WBD merger, Greenfield stated. Given that the Paramount acquisition targets all of WBD, including CNN, Ellison’s bid — which comprises approximately $24 billion from Middle Eastern sovereign funds — may encounter regulatory and political challenges, Greenfield pointed out.
“It’s imperative to facilitate the split,” Greenfield remarked in an interview. “If the Paramount acquisition fails to obtain regulatory clearance, you risk obstructing the split. You could find yourself in 2027 with declining cable networks, without having spun them off. Is it the U.S. intention to have a company substantially funded by foreign sovereign wealth capital owning CNN?”
‘Where’s Poppa?’
WBD’s board has expressed that one rationale for declining Paramount’s $30-per-share proposal was its worries regarding funding, noting a larger percentage of financing seemed to originate from Middle Eastern sovereign wealth funds compared to the Ellison family, which has allocated about $12 billion.
Paramount modified the terms of its agreement on Monday to alleviate funding concerns. Oracle founder Larry Ellison, father to David and one of the wealthiest individuals globally, pledged to provide “an irrevocable personal guarantee of $40.4 billion of the equity financing for the offer and any damages claims against Paramount,” in the event the current financing fails, Paramount announced in a statement.
Additionally, Paramount stated on Monday it would release records confirming the Ellison family trust “possesses roughly 1.16 billion shares of Oracle common stock and that all substantial liabilities of the Ellison family trust are publicly disclosed.” Paramount has indicated that the family trust will secure the financing. WBD’s board earlier stated that the trust is an “opaque entity,” preferring a direct investment from the Ellisons.
Significantly, even after the Monday announcement, the Ellisons have not augmented their personal equity investment, which remains at $12 billion. Internally, some WBD executives have reportedly invoked the 1970 Carl Reiner film “Where’s Poppa?” when discussing the acquisition attempt, according to a source familiar with the situation. WBD has sought further personal financial commitment from the Ellisons for the deal.
Ultimately, a WBD shareholder may not prioritize the source of the funding as long as it is assured. The three sovereign wealth funds involved in the transaction include the Saudi Arabian Public Investment Fund, Abu Dhabi’s L’imad Holding Co., and the Qatar Investment Authority. The PIF and QIA, particularly, are well-known institutions that have poured billions into other U.S.-based transactions.
Correction: This story has been updated to clarify that Warner Bros. Discovery shareholders have until Jan. 21 to submit their shares to Paramount for $30 in cash. An earlier version misrepresented this deadline.
