Paramount has approached Warner Bros. Discovery’s shareholders with an all-cash offer, CNN is reporting. The film studio will place the bid in order to gain control of Hollywood’s most lucrative mass media and entertainment conglomerate.
Paramount’s offer to purchase WBD comes after Netflix placed a bid on Friday. However, Paramount was originally considered to be the frontrunner to purchase WBD.
But the latter ultimately chose to partner with Netflix, which it said offered a more lucrative deal than Paramount originally did. Netflix’s proposed bid for WB was considered to be a surprise by Hollywood insiders, including Paramount CEO David Ellison.
The executive still contends that his deal is the better offer. “We’re sitting on Wall Street, where cash is still king,” Ellison told CNBC today during an interview. “We are offering shareholders $17.6 billion more cash than the deal they currently have signed up with Netflix. And we believe when they see what is currently in our offer, then that’’ what they’ll vote for.”
Paramount offered $30 per share in an all-cash deal for the entire company. Meanwhile, Netflix offered $27.75 for Warner Bros. and HBO. The streamer’s deal includes $23.25 per share in cash and $4.50 in stock.
Netflix believes the eventual spinoff of WBD’s cable assets, including CNN, will be worth several dollars per share. But Netflix believes that its deal will ultimately be worth more than its competitor’s offer.
Paramount believes that its offer is more lucrative, however, because it wants to buy WBD in its entirety. The studio’s offer will pay $108.4 billion for all of WBD’s assets. However, Netflix offered $82.7 billion in its offer. But their offer doesn’t include the value of the company’s cable channels.
WBD’s board has long argued that separating the cable assets from the movie studio and HBO will make them more valuable. The separation would significantly increase the prices and value for shareholders. WBD also said in a statement that it will review Paramount’s offer before its executives make their final decision.
WBD’s stock surged 7% to nearly $28 a share today, as investors anticipated a bidding war. Netflix may put in an even more lucrative offer to counter Paramount’s bid. Paramount’s stock rose 4%, while Netflix’s stock fell more than 3%.
If WBD ultimately chooses Paramount’s offer, the company will have to pay Netflix a $2.8 billion breakup fee.
Besides not wanting to pay the breakup fee, Netflix also believes that WBD will keep their deal because it will easily pass antitrust scrutiny.
Netflix also refutes Paramount’s marketplace claims by pointing to different metrics. Nielsen’s measurement of the industry shows Netflix maintains 8% of total TV usage time, slightly under Paramount’s 8.2%. By that measure, Netflix ranks No. 6 on the Nielsen gauge.
In addition to stating that his deal offers WBD shareholders more overall value, Ellison also insisted that Paramount’s offer stands a higher chance of regulatory approval. He said that Netflix’s offer would combine the number one streamer with HBO Max, which is in third place.
Ellison also pointed to his positive relationship with President Donald Trump. “I’m incredibly grateful for the relationship that I have with the president,” the executive told CNBC.
“And I also believe he believes in competition. And when you fundamentally look at the marketplace, allowing the No. 1 streaming service to combine with the No. 3 streaming service is anticompetitive,” Ellison added.
The executive also said that he’s had “great conversations” with President Trump about Paramount’s plan for its proposed news business. But the executive also said that he didn’t want to speak for the commander-in-chief, as his son-in-law, Jared Kushner, is involved in the deal’s financing.
Ellison also said his father, Oracle executive chairman Larry Ellison, is giving unspecified amount of equity to produce the cash for Paramount’s deal.
The father-and-son duo took over Paramount last summer. The business is the parent company of CBS, Paramount Studios, the Paramount+ streaming service and more.
WBD has not yet respond to Paramount’s deal. Netflix held a call with investors this afternoon. The studio’s executives were expected to respond to its competitor’s bid.
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