Blockbuster
A hostile takeover bid from Paramount Skydance for Warner Bros. Discovery has thrown a spanner in the works for Netflix. When cash is still king on Wall Street, nothing is a done deal.
It’s a big week on the street. Netflix’s ($NFLX) US$72B bid for Warner Bros Discovery ($WBD) was a blockbuster – ironically, the name of the video store Netflix offered to sell itself to in 2000 for US$50M. Blockbuster went bankrupt, and Netflix went on to be worth US$411B.
Now, the streaming giant has even bigger ambitions. It secured a US$27.57 per share cash-and-stock deal for Warner Bros.’ HBO Max, which would give it the rights to iconic franchises like Harry Potter and Game of Thrones. Netflix emerged victorious in a weeks-long showdown between itself, Paramount Skydance ($PSKY) and Comcast Corp ($CMCSA).
Then came this week’s plot twist: Paramount launched a hostile US$108B all-cash bid for Warner Bros. It’s hostile because it bypasses WBD’s board and goes directly to shareholders. And it's tempting – the all-cash deal is at a 139% premium to Netflix’s cash-and-stock mix.
During the 20-day period of Paramount’s tender offer, any WBD shareholder can sell shares to Paramount for US$30. If Paramount picks up 51% of the float, it controls WBD. Game over.
Paramount’s CEO David Ellison, son of Oracle ($ORCL) co-founder Larry Ellison, told CNBC, ‘We’re really here to finish what we started.’ He seemed fairly confident that shareholders would favour their offer, adding ‘We’re sitting on Wall Street, where cash is still king.’
The Netflix deal still needs regulatory approval – the Trump administration isn’t thrilled about a mega-streamer consolidating more power. If the deal fails to close, Netflix needs to pay WBD US$5.8B. And if WBD walks away, it needs to pay Netflix US$2.8B in breakup fees.
Investor reaction speaks volumes. $PSKY rallied 9% and $WBD jumped 4.4%, while $NFLX dropped 3.4% on Monday. Headlines around the media mega-deals almost drowned out IBM’s ($IBM) US$11B acquisition of Confluent ($CFLT), which sent $CFLT up 29% in a day.
M&A drama aside, tech giants like Nvidia ($NVDA) also reaped the benefits of a deal that allows shipments of its H200 chips to ‘approved’ customers in China, as long as the U.S. gets a 25% cut.
With a Fed rate cut coming into focus, the market promises no shortage of action. Whether you’re an investor or a spectator, get out the popcorn. This week will be pure cinema.
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