Paramount could go hostile after losing to Netflix
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Paramount was bested by Netflix on Friday in its efforts to buy Warner Bros. Discovery, but it may still appeal directly to WBD shareholders through a hostile takeover offer.
Why it matters: Paramount could argue that its all-cash bid of $30 a share is better in terms of both price and the likelihood of regulatory approvals, although it also would need to disclose more information about its debt financing.
- Both Netflix and WBD executives are confident that they'll receive the necessary sign-offs for their deal.
- "We've signed our deal and we are running full speed towards regulatory approval," Netflix co-CEO Ted Sarandos told investors Friday morning, when asked whether he expects to have to raise his offer if another bid came in.
Catch up quick: Netflix only agreed to buy WBD's studio and streaming assets for a combination of cash and stock, after WBD's cable networks are spun out into a separate company. Paramount's offer was for the entire business.
The intrigue: A source close to Paramount said the company, which didn't have visibility into Netflix's offer until Friday morning, legitimately thinks it made the best bid and is currently exploring next steps.
- An operative word is "patience."
- Paramount also thinks its offer could look even better when the Comcast cable networks spinoff begins trading later this month.
- It would serve as a market comparison to the WBD stub that Netflix will leave behind.
State of play: Paramount's lawyers have questioned the "fairness and adequacy" of the sale process, which kicked off after Paramount already has submitted three unsolicited offers.
- In a letter to WBD's board, Paramount said the auction was "tainted by management conflicts, including certain members of management's potential personal interests in post-transaction roles and compensation as a result of the economic incentives embedded in recent amendments to employment arrangements."
- It underscored concerns of board director "bias" toward a Netflix bid, without considering "heightened regulatory risk" and the potential value of a full bid versus a partial asset bid.
What's next: If Paramount decides to go hostile, it would kick off a messy fight with both WBD and Netflix.
- If it doesn't, Paramount would need to find a new way to expand its growing media empire. Major studio and streaming assets, like the ones owned by WBD, don't come up for sale often.
Both Paramount and WBD declined to comment for this story.
