Paramount Launches Takeover Bid To Block Netflix From Buying Warner Bros, Discovery

Paramount is challenging Netflix for control of Warner Bros. Discovery, taking its richer all-cash proposal straight to shareholders and urging them to rethink the Netflix agreement that WBD's board approved last week. The move raises the prospect of a bidding battle over one of Hollywood's major studios and its valuable HBO and cable networks.

Paramount CEO David Ellison argued that investors should focus on cash certainty rather than complex structures tied to future asset sales. Ellison said Paramount's plan is a straightforward purchase of all of WBD, including cable channels such as CNN, while Netflix is targeting only Warner Bros. and HBO and relying on a later cable spinoff.

Paramount offer for WBD versus Netflix deal: headline numbers and shareholder impact
Ellison told CNBC that Wall Street still values cash above everything else. "We're sitting on Wall Street, where cash is still king," Ellison told CNBC in an interview Monday. "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's what they'll vote for."

Paramount is proposing $30 per WBD share, entirely in cash, to acquire the whole company. Netflix, by contrast, has offered $27.75 per share for Warner Bros. and HBO, made up of $23.25 in cash plus $4.50 in Netflix stock, and excludes WBD's cable portfolio, including CNN, from the transaction.

Netflix insists its package will ultimately be richer once WBD's remaining cable businesses are spun off to current shareholders. Executives at Netflix argue that those assets will be worth several extra dollars per share when separated from the studio and HBO, and that the combination of cash, stock and future cable value tops Paramount's headline price.

The rival bids differ sharply in overall scale. Paramount values the entire WBD group at $108.4 billion, including the cable channels. Netflix's proposal comes to $82.7 billion because it leaves the cable networks out of its purchase, though Netflix believes the eventual market value of those assets will close much of the apparent gap.

WBD's board chose Netflix's bid last week, signalling a belief that spinning off cable later will release more value than selling everything at once. Directors have long heard arguments that cable assets like CNN might perform better as a separate company rather than bundled with Warner Bros. and HBO inside one group.

Paramount is now appealing over the board's heads and directly addressing investors. "WBD shareholders deserve an opportunity to consider our superior all-cash offer for their shares in the entire company," Ellison said in a statement. "Our public offer, which is on the same terms we provided to the Warner Bros. Discovery Board of Directors in private, provides superior value, and a more certain and quicker path to completion. We believe the WBD Board of Directors is pursuing an inferior proposal."

Responding to the public bid, WBD said it will evaluate Paramount's approach and outline its advice within 10 business days. The board must weigh not just headline price but also the risk of regulators blocking a transaction, the likelihood of completion and any penalties for walking away from the Netflix agreement.

Regulatory approval is already a central talking point for Paramount. Ellison told CNBC that tying Netflix, the largest subscription streaming platform, with HBO Max, which ranks third, would alarm competition authorities. He said regulators might view such a pairing as harmful to rivalry in a market already dominated by a few powerful services.

Netflix has pushed back on that idea by pointing to different industry measurements. It cites Nielsen data showing Netflix with 8% of overall US television viewing time, slightly below Paramount's 8.2%. By that gauge, Netflix stands sixth, with YouTube and Disney holding the first and second places respectively across total viewing.