Paramount Skydance makes $108B hostile bid to buy Warner Bros.

Paramount's offer is the latest battle in a bidding war that appeared to end Friday when Netflix and Warner Bros. Discovery announced Netflix was buying Warner Bros., the iconic movie and TV studio in Burbank near Los Angeles.

The Netflix deal, which included Warner Bros.’ assets such as HBO, HBO Max,  DC Comics and DC Studios, had an equity value of $72 billion and a total enterprise value of $82.7 billion. It involved Warner Bros. Discovery spinning off Discovery Global networks, including CNN, HGTV, Food Network and TNT, into a separate, publicly traded company. 

Stockholders would receive nearly $28 in cash and stock per Warner Bros. Discovery share under the Netflix purchase.

Unlike Netflix, Paramount, which merged with Skydance in an $8 billion merger in August, is offering to purchase all of Warner Bros. Discovery for an all-cash offer of $30 per share in a “hostile bid.” The term means Paramount is making its pitch directly to stockholders with an offer that doesn't require the approval of the Warner Bros. Discovery board.

Warner Bros. Discovery Monday said it plans to advise stockholders about Paramount Skydance's offer within 10 business days.

Shareholders would have until Jan. 8 to vote on Paramount's offer, according to media reports. 

Paramount Skydance, which announced its offer Monday, did not respond Tuesday to The Center Square’s request for comment. But David Ellison, chairman and CEO of Paramount Skydance, said in an earlier statement that Warner Bros. Discovery shareholders deserve a chance to consider his company's "superior all-cash-offer for their shares in the entire company." He added Paramount Skydance believes its proposal is a "more certain and quicker path to completion."

Paramount Skydance said its offer is more likely to clear regulatory hurdles.

The Center Square reached out Tuesday to Netflix with a request for an interview. A Netflix spokesperson responded by emailing comments made by Netflix's co-CEOs.

"This deal makes strategic sense for Netflix, for Warner Bros. and all the stakeholders that we serve," Co-CEO Greg Peters said. He noted Warner Bros.' extensive library of movies and TV shows means "more bang for their buck" for Netflix subscribers.

Co-CEO Ted Sarandos said the deal would mean Netflix picking up three businesses that the streaming service has never operated: a major movie studio, a TV studio and the HBO brand.

Under Netflix, Warner Bros. would continue to release movies in theaters as it has in the past, Sarandos said.

Allowing stockholders to make the decision of Netflix or Paramount is a good direction to go as Hollywood grapples with the new world of streaming and entertainment, economist Wayne Winegarden told The Center Square Tuesday. He said federal regulators shouldn’t interfere.

“If we allow the shareholders to decide, we’re allowing a larger segment of people to put their brains around it,” said Winegarden, a senior business fellow at Pasadena-based Pacific Research Institute. “Perhaps it’ll be wrong. But allowing more people to make that decision allows us a better chance to get to the right place.”

Winegarden said the Netflix deal may prove to be better for stockholders because they could make money off Warner Bros. Discovery spinning off its cable networks such as CNN.

But Ellison of Paramount Skydance argued the Netflix deal involves "an uncertain future trading value" of Discovery's Global Networks "and a challenging regulatory process."

"We take our offer directly to shareholders to give them the opportunity to act in their best interests and maximize the value of their shares," Ellison said.

Netflix said it will take 12 to 18 months for its deal, which requires approval by the Federal Trade Commission, to close.

Whoever loses in the attempt to buy Warner Bros. could decide to go to court, Winegarden said. “I think there’s a very good chance this gets ugly. To the extent it does, that’s not good for shareholders, not good for anyone. I hope it doesn’t come to that.”

The economist noted the Netflix deal may also be better for Warner Bros. employees because there wouldn’t be the redundancies that would exist if Paramount Skydance purchased Warner Bros. Paramount Skydance and Warner Bros. Discovery, which both operate major TV and movie studios, are more alike than Warner Bros. and Netflix.

Redundancies could make layoffs more likely if Paramount Skydance buys Warner Bros., Winegarden said. 

“A good friend of mine works for MTV,” Winegarden said, referring to one of Paramount Skydance’s networks. “For her sake, I'm hoping for Netflix.”