A dramatic twist happened in the Warner Bros. Discovery sale. After Netflix won the bid and officially pledged to buy the company's film, TV and streaming assets for $82.7 billion, Paramount Skydance swooped in with a hostile offer worth $108.4 billion. David Zaslav and the WBD board of directors have 10 business day from the date the bid was submitted to provide a decision to shareholders. And thus, uncertainty around the deal prevails.
Will Warner Bros. stay the course and sell to Netflix, or will it find Paramount's offer more attractive? Paramount CEO David Ellison seems confident the latter will be the case. Speaking to CNBC, Ellison said: "Look, we're sitting on Wall Street, where cash is still king. We are offering shareholders $17.6 billion dollars more cash than the deal they currently have signed up with Netflix. And we believe, when they see what is currently in our offer, that that's what they'll vote for."
Ted Sarandos, however, appears equally as confident in Netflix ultimately acquiring WBD, stating during a conference in New York: "Today's move was entirely expected. We have a deal done, and we are really happy with the deal for shareholders, for consumers, it's a great way to create and protect jobs in the entertainment industry. We're super confident we are going to get it across."
Though the two CEOs find themselves with differing opinions on the potential outcome of the hostile offer, analysts seem less conflicted. According to The Hollywood Reporter, though there are some who believe Netflix has the higher chances of succeeding in the sale, the prevailing opinion is that David Ellison's corporation is providing the better deal for Warner Bros. Discovery. The trade spoke to several analysts to get their perspective on the benefits of Paramount and Netflix's offers, and to discuss which one had the better chance of being accepted by WBD.
Prior to the hostile bid, Laurent Yoon, an analyst for Bernstein, appeared to suggest Paramount would move forward with said hostile offer: "It's not a hunt, it's a game of chess with more than one move to consider. Paramount is in a precarious position with further downside. As we've said, we remain skeptical about Paramount's standalone future. An organic path to recovery and growth will be long and arduous."
However, the analyst cautioned that Paramount could approach WBD with the same offer that was ultimately rejected prior to its deal with Netflix being announced: "We remain skeptical that shareholders would view that offer as superior to Netflix's—at minimum, it's far from a slam dunk, assuming the board went through a rigorous evaluation process." According to Business Insider, Paramount did end up privately delivering the same offer it had initially put forward.
OC&C Strategy Consultants' Kim Chua, on the other hand, stated the Paramount offer is stronger than Netflix's. Chua called Ellison's bid "cleaner," and considered it to have less regulatory risks, as its long been reported Paramount Skydance would have an easier time getting regulators' approval than the two other interested parties in the sale process:
"Whilst the industrial logic behind a Netflix-WBD deal is strong, the industrial logic behind a Paramount-WBD deal is stronger. The offer is also cleaner—cash, for the whole company, versus stock with restrictions, some cash, for cherry-picked parts of the company—and with less transaction risk—gaining regulatory clearance would be faster and more likely, with less time in potentially value-destroying 'limbo.'"
Analyst for TD Cowen, Doug Creutz, stated that Paramount's offer had advantages on both the money being offered (and its cash amount versus shares), and its chances of actually going through:
"We think it's very hard to argue that Netflix's offer is better than Paramount's, both on the basis of price paid and likelihood of completion. The Paramount offer has the advantage of being all-cash versus Netflix's cash/stock consideration, and also takes questions about linear network valuation off the table. We think that at least at the federal level in the U.S., Paramount has a better chance of getting the deal approved by regulators (states like California, as well as the rest of the world, are another matter), due to a closer relationship with the Trump administration."
Thus, as mentioned, the prevailing sentiment appears to be leaning more toward Paramount's bid offering more value for shareholders of Warner Bros. Discovery.
With that said, this doesn't necessarily mean WBD will favor Paramount over the streaming giant, as there might be a point of contention involved that could throw a wrench in David Ellison's plan to convince the company to sell to him. Semafor published a report, stating that a major factor that led WBD to reject Paramount's bid was the source of its funds.
Its funding partners have not changed for the hostile takeover offer. As such, assuming the aforementioned report is accurate, it might be unlikely for WBD to return to the negotiation table with a party it already rejected due to issues with their funding.