Shares of Warner Bros. Discovery (WBD) rose 6% on Friday after streaming giant Netflix (NFLX) announced its plans to acquire the company’s film and television studios as well as HBO Max and HBO.
The offer would see Warner Bros.’ Global Networks division of sports and television brands spun off into a new company called Discovery Global.
That spin-off, announced in June, would include “CNN, TNT Sports in the U.S., and Discovery, top free-to-air channels across Europe, and digital products such as the profitable Discovery+ streaming service and Bleacher Report (B/R).”
Then, on Monday, Paramount Skydance (PSKY) splashed the pot, making its own bid to take over the entire company and driving WBD shares up another 5%+.
You can see the full terms of the offer in Paramount’s SEC filings.
My colleague Chris Preston and I discussed the Netflix proposal in our latest episode of the Street Check podcast, but we both walked away from the conversation feeling lukewarm about the offer at best.
Netflix’s offer for the post-spin-off assets would give it more of something it already does fairly well (film and television production and streaming) while doing little to address its largest gap: live sports (of course, it would also exclude CNN and free-to-air European channels, which aren’t particularly appealing but also aren’t an albatross around the neck of whichever company ends up with those assets).
Paramount’s competing bid (more on that in a minute) is for all of WBD, Discovery Global included, and is, on its face, a more synergistic offer.
The combination of Paramount+ and HBO Max would (depending on subscriber attrition) garner an estimated 22% streaming market share, making it competitive with Netflix (21% share), Prime Video (22% share) and Disney/Hulu (combined 24% share).
That’s less likely to run afoul of regulators as it establishes a “Big Four” of streaming, whereas the Netflix offer would result in a “Big Three,” with Netflix in the pole position.
President Trump has already pushed back on the potential Netflix deal, saying it “could be a problem” and that he would be involved with any review. (Tin foil hat for a moment here: Netflix’s production deal with former President Barack Obama may have doomed the Netflix-WBD deal from the get-go.)
It should also be noted that Affinity Partners, helmed by President Trump’s son-in-law Jared Kushner, is providing some financial backing for the Paramount bid, as are three Sovereign Wealth Funds from the Gulf (those parties were explicitly referenced in proposals dated December 1 and December 4 ,which were disclosed in the SEC filing linked above).
So, while the Netflix acquisition of Warner Bros. is already approved by both boards, it’s not a foregone conclusion. And, frankly, media consumers may be better served by a successful bid by Paramount.
But where does that leave shareholders?
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Where Do the Competing Offers for Warner Bros. (WBD) Leave Shareholders?
There are, for the moment, four possible outcomes for shareholders: 1) The Netflix deal goes through; 2) The Paramount hostile takeover succeeds; 3) Another party makes a bid; 4) No deals are successful.
Let’s start with the last hypothetical.
No Deals Are Successful
I’m starting here because this is the least likely outcome. There’s already a board-approved deal in place, and Paramount is making a competing offer.
Sure, regulators could reject the deal, or the DOJ could threaten antitrust enforcement, but that’s not (currently at least) the world we live in. Consolidation has become the norm lately, and any resistance from the White House comes from a preference for who the winner is, not that there is a winner.
Someone will end up owning Warner Bros. next year; the question is who.
But, if no deals are successful, WBD shareholders will simply continue to own their existing shares and will receive the Discovery Global spin-off some time next year.
The Paramount Hostile Takeover Succeeds
Paramount is going directly to shareholders with its hostile takeover bid. They’re offering $30 per share via a tender offer, with an initial expiration of January 8, 2026, at 5:00 p.m. ET (subject to possible extensions).
If you’re interested in tendering your shares, you can contact your broker.
If Paramount is able to acquire a majority of shares outstanding, it’ll be able to force the merger through (hence the “hostile” descriptor), which will result in all WBD shares being acquired at $30, and existing holders will not receive the Discovery Global spin-off (because it would be canceled).
Even if you don’t tender your shares, if the bid is successful, you’ll ultimately walk away with cash. All you can do as a shareholder is tender your shares (or, if you oppose the offer, not).
The offer is subject to a “Minimum Tender Condition” of a majority of fully diluted shares, meaning that if Paramount doesn’t get enough shares tendered, it won’t cash out any shares that were.
The Netflix Deal Goes Through
Netflix’s offer to buy WBD’s assets (after the spin-off) remains in effect. In the event that regulators approve it and Paramount is unable to get a majority of shares tendered, it would be expected to go through.
This offer values each share of WBD at $27.75, which is made up of $23.25 in cash and $4.50 in shares of Netflix stock. The exact number of Netflix shares you’d receive won’t be known until right before the offer closes, but it’s around 0.04 shares based on the average price (VWAP: Volume-Weighted Average Price) for a 15-day period leading up to the offer’s closing.
Per Netflix:
“If the VWAP is below $97.91, WBD shareholders will receive 0.0460 Netflix shares for each WBD share. If the VWAP is above $119.67, WBD shareholders will receive 0.0376 Netflix shares for each WBD share.”
If the price of NFLX is somewhere between those two figures, you’ll receive the equivalent of $4.50 worth of NFLX at the VWAP price.
So, if this deal goes through, WBD shareholders will walk away with their spun-off Discovery Global shares, $23.25 in cash and somewhere around 0.04 shares of Netflix per share of WBD.
As of right now, the market is pricing this as a floor for the value of WBD.
Another Party Makes a Bid
A competing bid would be the best-case scenario for shareholders, as a bidding war could drive up the value of WBD shares. Comcast (CMCSA) was another potential buyer, but early Monday the company effectively acknowledged that it was the third horse in a two-horse race and conceded.
There don’t appear to be other buyers waiting in the wings, but it is possible that Netflix ups its own offer (and makes some public concessions to the White House) in a bid to further the deal.
Given that we’re still in the early stages of a potential bidding war, it’s probably worth holding on to shares (and tendering them if you want; you can withdraw your tender, but talk to your broker about the process) on the off chance that a better offer comes down the pike.
But as we get closer to the end of the tender period and see what (if any) response Netflix will offer, you may want to consider cashing out by selling your WBD shares. After all, with WBD shares trading north of 27, the current ceiling (the Paramount offer) is only giving you about 10.5% upside from here, and you could find yourself waiting a year or longer (the SEC filing estimates 12-18 months for the Paramount deal and 15-21 months for the Netflix deal) for the deal to be completed.
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