Paramount Skydance, owned by David and Larry Ellison, may not need to engage in a “hostile” approach to challenge the merger between Warner Bros. Discovery and Netflix, according to On the Money.
Following Netflix’s $72 billion acquisition of the Warner Bros. studio and HBO Max, David Zaslav, the CEO of WBD, suggested to his team that the Ellisons could disrupt the deal with an increased offer, as reported by various sources.
In particular, Zaslav anticipates that the Ellisons might be willing to elevate their bid to cover the $2.8 billion penalty enforced if WBD withdraws from its agreement with Netflix, based on insight from those familiar with the discussions.
“(Zaslav’s) thought is that the Ellisons could return with $35 in cash to account for the $2.8 billion breakup fee,” remarked an informed individual. “At that point, he must determine which proposal benefits the shareholders, as the company is owned by the Ellison family.”
No comments came from Zaslav’s representatives, and the Ellisons’ spokesperson also declined to comment.
On Monday morning, the Ellisons stated their intention to make direct offers to the shareholders, bypassing Zaslav and his board. They argued that their all-cash proposal of $30 per share is superior to Netflix’s bid, which only exceeds theirs by a marginal 75 cents but raises several concerns for WBD shareholders.
Zaslav appears to be aware of the Ellisons’ strategy. He recognizes that Richard, particularly, has accumulated over $250 billion through sharp Silicon Valley business tactics, indicating they would not simply step aside. At that moment, he hinted that a couple more dollars could tip the balance in favor of WBD.
It remains unclear how much the Ellisons would increase their bid. Earlier on Monday, David Ellison noted that the figure was at $30, just as WBD revealed Netflix’s winning offer at $30.75. By taking this assertive stance, he demonstrates to WBD shareholders that their $30 per share cash offer, amounting to $78 billion, is indeed more appealing than Netflix’s $27.75 offer.
While Netflix’s proposal includes a 15% stake, it hinges on additional financing of $2 to $4 per share from the eventual sale of WBD’s cable entities like Discovery, TNT, and CNN. They suggest that valuing those assets at $3 per share may be overly optimistic given their decline.
Netflix is seeking to acquire only Warner Studios and HBO Max, while the Ellisons are interested in the entire range of channels. They plan to inform shareholders that the Netflix agreement involves potential “tax leakage,” a negative tax incident due to the company’s disjointed nature, which could further diminish the overall value.
Officials from Paramount Skydance assert that Zaslav may not have realized the board’s willingness to offer more than $30, likely because he wanted to finalize a deal with his friend, Ted Sarandos, CEO of Netflix.
Moreover, they prioritize “regulatory certainty.” Larry Ellison, being a long-time supporter of President Trump, hints at connections that may play a role, especially as the Trump administration’s antitrust regulators have expressed concerns over Netflix’s increasing dominance in the streaming industry—a sector increasingly relied upon for entertainment.
With Netflix leading the streaming market at 300 million subscribers and HBO Max ranking third with 100 million, there are worries regarding the substantial market power a merger could create, with potential for monopolistic pricing.
Zaslav mentioned that he believes the Netflix merger would ultimately clear regulatory hurdles after a direct meeting with Sarandos and Trump, although Sarandos seemed displeased with suggestions of Netflix holding monopoly power, maintaining that view is misguided given the competition from other platforms like YouTube.
Insiders have indicated that while Trump showed an ambiguous stance on the merger’s antitrust implications, he was generous during his conversation with Sarandos, which WBD’s officials interpret cautiously. They do not view it as a definitive endorsement.
“Warner Bros. is more likely to incur penalties from Netflix than proceed with this deal,” remarked one official from the Trump administration. Concurrently, Netflix has agreed to compensate WBD a hefty $5.8 billion if it has to exit the partnership, significantly more than what WBD would owe if it terminated its deal with Netflix.
Other complications loom for Netflix as its stock plummeted, which underlines apprehensions among investors about large acquisitions—a tactic the company has generally sidestepped. Those familiar with the transactions indicate that the decline in stock could impact the equity payment to WBD, possibly necessitating additional funds.
On a separate note, David Ellison and Trump encountered one another at the Kennedy Center Honors Ceremony, where Trump sat near Ellison and engaged in conversation. Reports suggest that David Ellison alerted Trump to the imminent hostile bid.
President Trump, during a press conference, raised questions about whether Netflix should be allowed to acquire WBD, indicating skepticism over their large market share. “That’s questionable. They have a very large market share. I’ll be involved in that decision,” he stated.
However, hostile takeovers can be both challenging and costly. The Ellisons have significant financial resources at disposal. Larry Ellison is known to be actively thwarting rival bids and rallying shareholder support. It’s plausible that he could simply wire Zaslav an additional $5 per share to clear penalties, effectively diminishing Netflix, a vast $400 billion entity with hesitant stakeholders.
Zaslav is likely to be very attentive to these developments.
