Warner Bros. Discovery in Bidding War Amid Paramount Skydance’s Offer

It turns out, the bidding isn’t quite over yet, as the latest valuation hit 75 cents a share.

On Thursday, Warner Bros. Discovery (WBD) received an all-cash proposal from Paramount Skydance, offering $30 per share, as reported by sources close to the situation. Meanwhile, Netflix pitched a deal to acquire WBD’s Warner Bros. Studios and HBO Max, valuing the company at approximately $30.75 per share.

The competition seemed fierce, but less than a day later, WBD’s board, along with CEO David Zaslav, confirmed their acceptance of Netflix’s bid. Clearly, the owners at Paramount Skydance, including David Ellison and his billionaire father Larry, were left dissatisfied with the turn of events.

Sources note that the Ellisons are quite upset and are gearing up to respond. They believe they can sway WBD shareholders, claiming that the process was flawed due to the friendly ties between the CEOs.

A media executive involved in the discussions remarked, “They’re really angry at Paramount Skydance,” suggesting that the Ellisons view the bidding process as compromised. They’re counting on shareholders being outraged once they learn the details.

The CEOs in question are Zaslav and Netflix’s Ted Sarandos. Insiders indicate that their perspectives on recent events differ significantly.

A source close to Zaslav mentioned, “He gave them six tries, but they just couldn’t match Netflix’s offer.”

Despite this initial acceptance, Zaslav remains open to a counter-offer from the Ellisons before the merger is finalized. The competitive landscape surrounding this deal has been marked by some of the most intense bidding seen in recent corporate memory.

One source from WBD indicated, “If the Ellisons manage to raise their offer—maybe to around $35, which could include covering Netflix’s breakup fees—they might just secure ownership.” However, even if they succeed, Zaslav feels there’s still more to consider.

Zaslav reportedly doubts the Ellisons can make a substantial new offer. He opted for Netflix because he was wary of Paramount Skydance’s financial stability and questioned the backing of their bid. Netflix has committed a hefty $5.8 billion penalty and has substantial cash assets.

Interestingly, Zaslav appears impressed by the sheer scale of Netflix. The latter boasts a market valuation above $400 billion, while Paramount Skydance sits at about $14.6 billion. Since much of Larry Ellison’s wealth is tied to Oracle—recently impacted by stock fluctuations—funding their offer has become complicated.

Moreover, Zaslav has reportedly ceased communication with Paramount Skydance’s financiers, limiting their ability to improve their offer beyond the initially stated $30 per share. There’s speculation that should Netflix succeed, they might offer Zaslav a desirable role post-acquisition.

However, sources close to Zaslav claim he hasn’t been approached for such a position and that he has no intention of seeking employment once the dust settles. He may choose to pursue investments alongside his long-time mentor, John Malone.

It’s noteworthy that Zaslav and Sarandos have a strong rapport, while Zaslav doesn’t know the Ellisons as well. Yet, according to insiders, this familiarity did not influence the bid’s outcome.

Netflix’s offer includes sufficient cash and guaranteed stock, which breaks down to a $27.75 cash valuation for the studio and streaming services, with additional value expected from spinoff assets.

The Ellisons believe that if Netflix emerges victoriously, they will contest potential regulatory issues. They argue that the merger could face antitrust challenges due to both companies’ market power in streaming.

Although a definitive resolution regarding the hostile bid is still pending, the Ellisons feel confident in their proposal. They plan to highlight any perceived weaknesses in Netflix’s bid, banking on a valuation increase post-spinoff of cable assets.

Sources indicate the Ellisons believe the cable segment is undervalued and could bolster their overall offer.

Representatives from WBD and Paramount declined to comment on the ongoing discussions.

Interestingly, Zaslav has noted that Sarandos has possibly minimized potential regulatory concerns through recent discussions with political figures, suggesting that the Netflix-WBD merger may face less scrutiny than anticipated.

White House representatives did not respond immediately to requests for comment, and Netflix has also remained silent regarding the specifics of Sarandos’ meeting with Trump.