Bankers for Paramount Skydance have been actively looking for activist investors to help it upend Warner Bros. Discovery’s sale of its studio and streaming service to Netflix, On The Money has learned.
One emerged on Wednesday when Ancora Holdings announced it had built a tiny stake – just $200 million in a company with a market cap of nearly $70 billion – as it attempts to prod the WBD board to reconsider its decision to accept the $27.75 bid by Netflix for pieces of the company instead of Paramount Skydance’s $30-a-share offer to buy all of it.
The question is whether this is enough to help move the rest of the WBD investor class to join its effort to upend the Netflix offer, though there are some signs it just might.
Ancora certainly thinks so. “The currently proposed Netflix-WBD deal asks shareholders to accept inferior value, gamble on an uncertain spinoff and shoulder significant regulatory risk — despite the availability of a higher value and more certain $30 per share offer from Paramount,” Ancora said on its website.
A spokesman for Ancora tells On The Money that the fund “made a completely independent decision to invest in Warner Brothers based on its investment team’s ideation, analysis and execution … Ancora was never approached by any suitor of Warner Brothers. Likewise, Ancora never attempted to contact any suitor of Warner Brothers.”
But Ancora’s announcement came after reps of Paramount Skydance, known on Wall Street as PSKY, have been badgering activist hedge funds since late December to join its now hostile attempt to wrest control of the property from Netflix.
One major activist investor told On The Money that he’s received “a bunch of calls from bankers involved with this thing to take a stake” and vote against the deal, when shareholders are slated to approve the Netflix purchase later this month or early next.
The activist, who asked not to be quoted by name, said he decided against taking a position because of the difficulty in mounting activist plays on media companies, like WBD, where management has strong support from major investors.
Another issue: The timing of WBD’s shareholder vote to sell to Netflix makes it next to impossible to elect new directors in time to prevent the sale.
A Paramount Skydance spokeswoman had no comment.
At least for now PSKY needs to work hard to change the hearts and minds of WBD investors about Netflix – even if it has strong arguments why they should think twice. Shareholders have tendered just a fraction of the 2.6 billion shares outstanding for its offer, and that’s after some recent and significant developments in its favor.
Talks are ongoing; and many investors are said to be sympathetic to PSKY’s argument that it offers a cleaner deal, both from a regulatory standpoint and in terms of money since Netflix’s valuation relies heavily on the uncertainty of the spinoff of WBD’s cable properties. On The Money has learned that Pentwater Capital Management, a major WBD investor with more than $100 billion in assets under management, has officially joined Paramount Skydance’s efforts and will support its hostile bid; it could get a board seat if PSKY ultimately triumphs, a person close to the media company says.
PSKY, meanwhile, recently sweetened its offer, albeit minimally, to include money for a $2.8 billion breakup fee if the Netflix deal is turned down by WBD and other small items. Even better for its cause is what’s coming out of DOJ antitrust, which must approve the Netflix deal and has some significant misgivings given the layering of its No. 1 streamer with the No 3 streaming in HBO Max, and whether that constitutes the beginning of a monopoly over how Americans increasingly view their entertainment.
As The Post has reported, because of all of the above Warner Bros. Discovery may have no choice but to seriously consider the latest sweetened takeover offer by Paramount Skydance to scuttle its megadeal with Netflix, particularly if PSKY increases its bid as many think it still will.
Netflix counters that the review is standard, but people inside the Trump administration say it’s more serious. Even so, barring a move by PSKY to increase its offer to around $33 a share – a move that would force the WBD board to reopen the bidding process – the deal seems to be moving toward Netflix winning the shareholder vote and owning the company.
That is, unless investors wake up and realize the government might just say “no,” or PSKY throws in more money.
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