Confidence is growing inside Paramount Skydance that Warner Bros. Discovery will jettison its deal with Netflix in a matter of days and reopen a monthslong bidding war for the company, The Post has learned.
If WBD does reopen the process, it will have less to do with the recent barely enhanced offer by Paramount — where it didn’t increase its all-cash $78 billion bid other than agreeing to cover a breakup fee to walk away from Netflix – than the worries about valuation and the regulatory uncertainty.
As The Post reported last week, the firm known as WBD that controls that iconic Warner Bros. studio, HBO Max streaming service and cable properties like CNN and Discovery has been under massive pressure to consider the “sweetened” offer from Paramount Skydance.
Increasingly, WBD investors believe the nearly sealed, $72 billion deal with Netflix for the studio and streaming service is facing insurmountable regulatory hurdles, while they also are questioning the valuation of the Netflix offer.
“We’re going to get this company sooner or later,” said one person working on the Paramount Skydance bid. “The numbers don’t add up and there’s no way this gets approved on antitrust grounds.”
Meanwhile, according to one GOP operative with knowledge of the Trump administration position of the Netflix deal: “So far it’s going nowhere with the executive branch.”
People inside Paramount Skydance, run by indie movie producer David Ellison with backing of his multibillionaire father, Oracle co-founder Larry Ellison, say they have received no word from WBD on reopening the process. A WDB spokesman, meanwhile, had no comment on the matter.
There is some feeling that WBD is leaking news of a new bidding process, and it might be doing so to protect itself from potential litigation and then settle back on the Netflix offer. Paramount has already sued the company stating that it’s ignoring its superior offer because of a friendship between WBD CEO David Zaslav and Netflix chief Ted Sarandos.
But such a ploy to merely check the boxes is running into the reality of the regulatory mountain Netflix faces. Any review by DOJ antitrust would take six months and maybe longer now that the agency’s chief Gail Slater resigned amid pressure inside the White House.
In December, WBD announced that it had accepted a deal for Netflix to buy its streaming and studio units over Paramount Skydance’s offer to buy the entire company, calling it superior. The move prompted a hostile offer from Paramount, asking investors to tender or vote their shares for its deal.
On paper, it looks like investors are siding with Netflix and WBD, but there are signs the mood among shareholders has begun to shift, which is why the WBD is moving closer to reopening the process.
The $27.75-a-share, all-cash bid includes money from a planned sale of WBD’s cable operation to push it above the $30 a share Paramount is offering. Yet investors increasingly worry that the spin-off won’t fetch $3 a share as is being promised.
The new cable company will have lots of debt on its books, and based on the metrics of Versant, the cable spinoff of Comcast, the WBD so-called equity stub might not be worth more than $1 a share. Meanwhile if WBD offloads that debt to the part of the company Netflix is buying to increase the value of the cable properties like CNN, TNT, and Discovery, that would have the effect of revaluing its per-share price to something closer to $23 a share.
The metrics of the Netflix deal get more complicated when you consider the regulatory pushback from the Trump administration, worried that Netflix would hold tremendous pricing power by controlling the No. 1 and No. 3 streaming services.
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