Paramount set the stage this week for a high-stakes battle with Netflix when it launched a hostile takeover bid for Warner Bros. Discovery.
Their offer: Paramount would pay cash to acquire all of Warner Bros. Discovery shares for $30 apiece, for a $78 billion takeover bid.. The proposal involves acquiring all of Warner Bros. Discovery, including cable channels such as CNN and its HBO Max streaming service.
Paramount’s bid came after Netflix announced a deal for $72 billion — or $27.75 a share — for a big chunk of the company: Warner Bros. film and television studios, which hold the rights to Batman, Bugs Bunny and Harry Potter, the expansive lot in Burbank and HBO and HBO Max. Going straight to the shareholders, Paramount said its offer was “superior” and would “create a stronger Hollywood.”
“It is in the best interests of the creative community, consumers and the movie theater industry,” said David Ellison, chairman and chief executive of Paramount, in a statement. “We believe they will benefit from the enhanced competition, higher content spend and theatrical release output, and a greater number of movies in theaters as a result of our proposed transaction.”
Here’s what you need to know about the blockbuster fight:
What is a hostile takeover?
Paramount made what’s known as a “tender offer,” publicly proposing to buy a company’s shares directly from its shareholders at a premium price for a limited time. Acquiring Warner Bros. Discovery shares would allow Paramount to gain control of its acquisition target.
In this case, Paramount noted its all-cash offer of $30 per share represented a 139% premium to Warner Bros. Discovery stock price of $12.54 as of September 10. Netflix’s proposal, Paramount noted, involves a mix of cash and stock.
By going directly to the shareholders, Paramount is also putting pressure on Warner Bros. Discovery after it accused the company of not engaging meaningfully with multiple proposals it put forth over 12 weeks.
How has Warner Bros. responded and what is the deadline?
The board of directors of Warner Bros. said in a statement Monday that “consistent with its fiduciary duties” it is carefully reviewing and will consider Paramount’s offer “in accordance” with its agreement with Netflix.
The board, working with financial and legal advisors, said that within 10 business days it will make a recommendation regarding Paramount’s tender offer. It’s also advising its shareholders not to take any action at this time.
Unless the deadline gets extended, Paramount’s tender offer is scheduled to expire at 5 p.m. Eastern on Jan. 8.
How often do these hostile takeovers succeed?
The Wall Street Journal, which analyzed LSEG data, reported that roughly 29% of all hostile tender offers since 2000 that involved multiple bidders were successful.
When billionaire Elon Musk wanted to take over social media site Twitter in 2022, he started purchasing the company’s shares. He later made a tender offer to buy stock in Twitter, which was later renamed X, at $54.20 per share, valuing the deal at $43 billion.
Successful hostile takeover bids have included the Royal Bank of Scotland’s deal for National Westminster Bank in 2000.
One of the bigger examples of a failed attempt was Valeant Pharmaceuticals International’s $53-billion takeover bid for Botox-maker Allergan in 2014, an offer that was dropped.
What could influence the results?
Netflix could counter with another offer but their deal is also subject to regulatory approval from the U.S. Justice Department.
President Trump has raised antitrust concerns, stating at a Sunday event that “it is a big market share. It could be a problem” when asked about the Netflix deal.
Trump’s son-in-law Jared Kushner’s investment firm Affinity Partners is among backers of Paramount’s offer along with Middle Eastern sovereign wealth funds, including Saudi Arabia and a Chinese firm.
Asked about the competing proposal from Paramount at a White House event on Monday, Trump signaled he was undecided.
“I have to see what percentage of market they have. None of them are particularly great friends of mine,” he said.
