David Ellison Just Declared War
Having presumably choked on splashy “Netflix buys Warner Bros.!” headlines all weekend, Paramount Skydance responded Monday morning with news of its own: The David Ellison–led company is launching a hostile takeover bid for Warner Bros. Discovery. “We’re really here to finish what we started,” Ellison told CNBC. After losing the initial fight to Netflix CEO Ted Sarandos, Ellison will appeal directly to WBD shareholders with the same offer their company’s board rejected last week. After decrying that bidding war as “tainted” in a letter sent by lawyers last week, David Ellison, No. 1 boy of centibillionaire Oracle exec Larry, has gone full Kendall Roy on the situation. Let’s break down what it means for WBD, Netflix, and Paramount going forward.
Hostile takeover? Didn’t Netflix secure the deal to buy WB?
Yes and no. To recap, Warner’s board agreed to Netflix’s $82.7 billion offer to buy its “streaming and studios” — a carve-out that includes HBO and HBO Max, WBD’s 100-year-old IP library, assets such as Batman and the Harry Potter movies, and related subsidiaries like DC Comics, WB Games, and a global parks and experiences business. Ellison’s $108.4 billion offer, which he will now put in front of WBD’s individual shareholders, involves buying all that plus WBD’s cable networks, a shrinking but still significant business that includes CNN, TNT, TBS, and several other networks. But Netflix’s deal must still pass regulatory approval.
If you’re new to hostile takeovers, Ellison is deploying something called the “tender offer” strategy. Basically, if more than 50 percent of shareholders think his offer is better and vote against the board’s recommendation to sell to Netflix, the top streaming service could ultimately lose to Paramount. There’s an associated $2.8 billion breakup fee for WBD should it not side with Netflix, and if the hostile takeover proves successful, either WBD or Paramount will have to foot the bill.
How did Netflix respond to the hostile-takeover development?
Sarandos is playing it cool, Deadline reported. “Today’s move was entirely expected,” the Netflix CEO said this morning at a conference in New York, where he took some questions. “We have a deal done, and we are incredibly happy with the deal. It’s great for shareholders, great for consumers. We think it’s a great way to create and protect jobs in the entertainment industry,” he added.
What’s Paramount’s case for buying the company?
Paramount’s offer — its fourth in an aggressive bidding war that ran through Thanksgiving weekend — was richer but ultimately lost in front of WBD’s board. Ellison’s company has now put the same deal to WBD shareholders. “We are offering shareholders $17.6 billion more cash than the deal they currently have signed up with Netflix,” Ellison told CNBC. “We believe when they see what is currently in our offer, then that’s what they’ll vote for.”
For its winning bid, Netflix offered $23.25 cash per share, plus $4.50 in stock, and Sarandos, per Bloomberg, tried to woo President Donald Trump in the negotiating process. By comparison, the Paramount bid is an all-cash offer priced at $30 a share. Added up, Paramount’s offer tops Netflix’s by $25.7 billion. WBD’s board likely reasoned that, after it spun off its cable assets, that number would shortchange their value and that Netflix made the stronger offer for the streaming and studios business.
But Ellison has positioned himself as better suited to get a deal over its regulatory hurdles, in part thanks to his family’s proximity to the Trump administration. And we haven’t even gotten to the part about how Jared Kushner’s helping him finance this thing.
Wait, Jared Kushner is mixed up in this?
Surprised? Everyone’s least favorite in-law-in-chief heads one of the firms helping Ellison finance his bid. Other backers of Paramount’s offer are the Ellison family, banks, the sovereign wealth funds of Saudi Arabia, Qatar, and Abu Dhabi, and private-equity firms like Affinity Partners, which Kushner has founded and led since the end of the first Trump administration. Affinity has faced lots of scrutiny, since much of its funds come from the Public Investment Fund, a.k.a. Saudi Arabia’s sovereign wealth fund.
So is this worth it? Would Paramount be a better owner than Netflix?
It depends on whom you ask. Paramount has promised to prioritize the theatrical experience and release more than 30 films to theaters annually if the company swallows up Warner Bros. Discovery. And Paramount seems to emphasize blockbuster cinema: Avatar director James Cameron, who worked with David Ellison on the release of Terminator: Dark Fate, praised him on The Town podcast recently as “the best possible choice” to lead the company. Paramount would likely supercharge its comparatively weak streamer Paramount+ with the libraries of HBO Max and the 100-year-old Warner Bros.
At the same time, there is no scenario where a Paramount acquisition avoids prompting catastrophic layoffs in Hollywood. As industry observers have noted, the Paramount deal would smash together two companies that both own cable assets, studios, and streaming services and each hold a massive stake in television news output. A Netflix purchase — despite the fact that it has no theatrical track record and would be swallowing up a major studio and streaming competitor — represents some upside on that front, as many of the additional assets it would be buying feel genuinely additive for the company. A number of Republicans, Democrats, and Hollywood unions have already raised anti-competition concerns about the Netflix sale, but no dispassionate observer could say a potential Paramount acquisition wouldn’t involve similar anxieties.
What is Trump looking to get from this?
Over the weekend, President Trump said the resulting market share Netflix would obtain over streaming if its deal went through “could be a problem” and vowed that he’d “be involved” in reviewing the deal. But the president also praised Netflix; called Sarandos, who has chummed it up with Trump over dinner at Mar-a-Lago “fantastic”; and confirmed he met with the Netflix CEO at the White House as the company secured its deal. The president has a long-standing friendship with Larry Ellison, and his son-in-law is enmeshed in the financing of the Paramount bid. Plus, the younger Ellison has already made Trump-friendly moves as the head of Paramount, including installing Bari Weiss as CBS News’s president and reviving the Rush Hour franchise. It’s starting to sound like a fair antitrust reviewof one of the biggest media and entertainment mergers of all time perhaps should not involve a president with skin in the game. And yet!
A deal of this size will be scrutinized by the Department of Justice and state attorneys general on antitrust grounds and will likely require approval from the European Commission, as well as other governments around the world. All of that applies to Paramount’s hostile takeover, too, but to hear Ellison tell it, he and his company have “a more certain and quicker path to completion,” as he said in his CNBC interview today.
How could this end?
It’s important to remember that not every hostile takeover is Elon Musk buying Twitter. Ellison’s bid could still float into WBD shareholders’ inboxes like a brick parachute. But for now at least, he and his family have the money and will to keep fighting for control.
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