Warner Bros. Discovery’s Deal Strategies and Bidding War
David Zaslav, the CEO of Warner Bros. Discovery, seems to be eyeing a significant collaboration with Netflix. However, his underlying intention appears to be igniting a fierce competition akin to the iconic Ali-Frazier bouts, according to On the Money.
“I wanted to get these guys in the ring together and have a match,” he remarked to a source familiar with the situation. “And that’s beneficial for shareholders.”
The companies “they” refers to are Netflix, which seemingly triumphed in a lengthy bidding conflict for WBD’s studio and streaming platform, and Paramount Skydance, which has issued a competitive offer aimed at disrupting this deal.
Insiders have indicated to On the Money that Zaslav has been preparing to present a “best and final offer” to Paramount Skydance (PSKY) well ahead of the announcement made on Tuesday.
He maintained an open line of communication with PSKY’s leader, David Ellison, and his affluent father, Larry Ellison, who is funding the proposed acquisition.
Despite some evident friction between the parties, Zaslav is swiftly pushing toward a shareholder vote to greenlight Netflix’s offer of $27.75 per share, a substantial $73 billion transaction that has his board’s approval, in contrast to the offer from PSKY.
PSKY has adopted a “hostile” approach in courting shareholders, attempting to acquire the entire company. Tension has been palpable at times within the boardroom, with PSKY even taking legal action against Zaslav, claiming preferential treatment towards Netflix due to Zaslav’s ties with its CEO, Ted Sarandos.
However, it seems Zaslav has been quietly negotiating with the Ellisons via financial intermediaries, showing respect for their capabilities and being open to a deal. During this period, PSKY bumped its bid from $30 to at least $31 per share, bringing its total offer to over $80 billion.
This is quite a leap, especially considering that when the bidding process began last September, WBD shares were valued around $12, and David Ellison’s initial offer was $19 in both cash and stock.
A representative for the Ellison family did not immediately respond regarding their acceptance of Zaslav’s latest offer, yet speculation in Wall Street and media circles suggests they might consider it. A spokesperson for WBD opted not to provide comments beyond the latest announcement.
Zaslav, well-respected in the media landscape, has an extensive background in management, having ascended after his tenure at NBCUniversal and overseeing AT&T’s acquisition of Discovery, which was initiated when they shifted focus away from cable TV and programming, ultimately resulting in a separation from WarnerMedia in 2021.
After an initial slow phase, WBD began evolving into a robust media enterprise by 2025. Zaslav effectively reduced company debts and transformed HBO Max into a profitable and widely used streaming platform. Notably, Warner Studios managed to produce a succession of successful films, while its cable properties, including CNN, maintained profitability amid the trend of cord-cutting.
As previously reported, once Ellison initiated his bid, Zaslav explored potential rival bidders, leading to competition from Amazon, Apple, Comcast, and Netflix, pushing prices even higher. A vigorous bidding session in late December culminated in a standoff between Netflix and PSKY, with Zaslav’s board leaning toward Netflix for an upcoming shareholder vote.
While not naive, the Ellisons, notably Larry and David along with their partners at Redbird Capital, have recognized several challenges related to Netflix’s offer, particularly from legal and financial perspectives. Investors have to navigate potential hurdles in selling cable assets individually to surpass the $30 price point, especially given existing debts on the balance sheet.
Moreover, merging Netflix’s leading studio and streaming service will likely face scrutiny from the Justice Department’s antitrust division. Former President Trump, an ally of Larry Ellison, has expressed intentions to ensure CNN transitions into more favorable stewardship, particularly given its prior critiques of his administration.
Current reports reveal that regulatory challenges are intensifying, fuelling Zaslav’s reconsideration of reopening the bidding process and gathering more funding from both Netflix and PSKY.
Ellison acquired Paramount Media, founded by Sumner Redstone, in a deal that resembled a distress sale last year, as it was hemorrhaging cash despite having influential assets like CBS. With streaming services struggling and studios underperforming, the Ellisons continue to depend on WBD’s resources.
As Zaslav anticipates further action from PSKY, the 7-day period for the best and final offer is crucial. There are indications that PSKY might increase their bid by nearly $3 per share, but Netflix retains the right to match this offer, which is precisely what Zaslav aims for.
Netflix, while potentially withdrawing, is also looking to enhance its business structure by integrating physical studios to bolster its streaming model and may be prepared to confront government opposition as it presently contends with PSKY over WBD.
“You’re the maestro,” remarked one investor upon reviewing Tuesday’s announcement. Zaslav reportedly responded, saying, “I never expected to be compared to Leonard Bernstein.”
