Activist Investor Challenges Warner Bros. Discovery’s $72 Billion Deal with Netflix
Ancora Holdings, an activist investment firm, is gearing up to contest Warner Bros. Discovery’s (WBD) planned $72 billion sale of its film and TV studio, along with its streaming service HBO Max, to Netflix, as reported recently.
The firm, based in Cleveland and managing about $11 billion in assets, is set to reveal on Wednesday its backing for Paramount Skydance’s cash offer to acquire the entire company. This all-cash bid values WBD at approximately $78 billion, putting it in direct opposition to the Netflix deal.
Paramount’s offer stands at $30 per share for all of WBD, marking a significant challenge for the company amidst rising tensions regarding the Netflix transaction.
In an email addressed to CEO David Zaslav, Ancora, which holds less than 1% of WBD stock, indicated plans to initiate a proxy fight if the board opts not to negotiate with Paramount over its competing takeover proposal. The firm has expressed intentions to continue acquiring WBD shares in the meantime.
Those familiar with the situation noted that Ancora’s motivation includes potentially replacing board members affiliated with Zaslav, raising questions among insiders about Zaslav’s true intentions regarding the Netflix deal. Some speculate that he may have an interest in securing a role at Netflix post-acquisition.
Ancora has also voiced concerns about potential antitrust issues surrounding the Netflix deal, labeling it as “uncertain and inferior,” and criticizing Discovery’s anticipated spinoff that could leave the cable network burdened with about $17 billion in debt despite dwindling viewership.
In defense of Paramount as a buyer, Ancora highlighted the credentials of CEO David Ellison and his family’s notable background, expressing confidence that Paramount would swiftly gain regulatory approval.
On Tuesday, Paramount announced adjustments to its initial hostile bid, introducing a “ticking fee” and other financial enhancements, although it maintained the all-cash offer at $30 per share. Paramount asserts that its proposal is more favorable than the ongoing agreements with Netflix and Warner.
Ellison emphasized in a statement that these changes signal a strong commitment to delivering value to WBD shareholders, promising billions of dollars and a clear regulatory path to ensure protection from market fluctuations.
Under the revised terms, shareholders would receive a quarterly fee of 25 cents per share after 2026 if the transaction is not finalized by then, which translates to around $650 million per quarter.
Paramount also committed to covering a $2.8 billion fee payable by Warner to Netflix in case the deal does not go through, alongside alleviating a potential $1.5 billion in debt refinancing costs.
According to Paramount, these amendments, including ticking fees and financial backing, are fully funded through substantial commitments from the Ellison family and various financial partners. Warner has acknowledged the revised offer and stated that its board will assess it, although they have consistently advised shareholders to reject Paramount’s bid in favor of the Netflix deal.
Jerry Cardinal, founder of RedBird Capital, commented to CNBC that the adjustments aim to “strengthen and perfect” the offer, clarifying that they have removed administrative hurdles that were previously used to signal resistance to engagement.
Inquiries have been made to WBD, Paramount, and Netflix for further comments on the matter.
