Warner Bros. Discovery Sparks Bidding War Speculation,Rattling Media Stocks
Wall street is anticipating a fierce bidding war for Warner Bros. Discovery, sending ripples through the shares of potential acquirers Paramount Skydance and Netflix.
Paramount Skydance is considering raising its $30-a-share all-cash offer as part of a “antagonistic takeover” strategy, directly appealing to WBD shareholders. This contrasts with Netflix’s $27.75-a-share cash-and-stock bid, which hinges on the sale of assets like CNN to reach the $30 mark. Media investor Mario gabelli has already indicated he’s “highly likely” to tender his WBD shares to paramount Skydance.
Insiders believe a $5 increase from Paramount Skydance could disrupt the Netflix deal. Traders are predicting Netflix,backed by a $441 billion market value,will be compelled to counter with a higher offer,despite Paramount’s backer Larry Ellison’s $270 billion net worth.
Though,the prospect of a costly bidding war is impacting both Paramount and Netflix’s stock prices,as traders engage in “merger arbitrage” – betting on which shares will underperform.
The biggest winner so far is Warner Bros. Discovery CEO David Zaslav. WBD shares have surged nearly 17% as the initial Netflix agreement, trading above $28 and possibly exceeding $30 if the predicted bidding war materializes.
“After Paramount announced the hostile [takeover bid], I hear it’s almost guaranteed that Netflix will up its offer to stay in the game,” stated a media executive familiar with Wall Street activity.
Representatives for netflix and Paramount declined to comment. The expectation of “sweeteners” in hostile bids fuels the belief that Paramount will increase its offer, forcing Netflix to respond in kind.
Trump’s Stance Remains Unclear as paramount,skydance,and Netflix Vie for Warner Bros. Discovery
The battle for Warner Bros. Discovery (WBD) is intensifying, with Paramount Skydance and Netflix emerging as frontrunners. The outcome hinges, in part, on the unpredictable stance of former President Donald Trump, according to sources familiar with the situation.
Paramount Skydance is currently seen as having an edge, largely due to the close friendship between Larry Ellison, a key investor in skydance, and Trump. Additionally, the combination of Paramount and WBD presents less overlap with existing operations compared to a Netflix acquisition. However,a successful Netflix bid would result in the streaming giant controlling approximately 30% of the streaming market,a prospect that has already raised concerns within the Trump administration. https://www.nypost.com/2024/02/29/business/trump-weighs-in-on-wbd-netflix-paramount-skydance-deal/
The situation is further elaborate by Trump’s evolving relationships with key figures in the media landscape. While he maintains a strong rapport with Ellison, he has also recently fostered a friendship with Netflix CEO Ted Sarandos. Trump has publicly expressed reservations about the Netflix-WBD merger, stating it “could be a problem,” but subsequently criticized Paramount Skydance following a “60 Minutes” interview featuring Representative Marjorie Taylor Greene, a vocal critic of Trump.
Sources indicate that Trump has not yet formally discussed his views on the deal with the Justice Department’s antitrust division,despite concerns within the DOJ regarding Netflix’s potential market dominance. Both potential deals will face rigorous antitrust reviews. Paramount Skydance will also be subject to scrutiny if its bid prevails.
David Ellison, CEO of Skydance, may need to increase borrowing or secure additional equity partners unless his father, Larry Ellison, reduces his holdings in Oracle. https://www.reuters.com/markets/deals-news/skydance-ceo-ellison-may-need-more-funding-wbd-deal-sources-2024-02-29/
The uncertainty surrounding Trump’s position has created a favorable environment for arbitrageurs, who thrive on complex and unpredictable situations.
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