Warner Bros. Discovery (WBD) turned down the latest hostile takeover bid from Paramount Skydance (PSKY) on Tuesday, but here's the twist: they're giving David Ellison's company until February 23 to come back with its absolute best shot.
And just to keep things interesting, Netflix Inc. (NFLX) gets to match whatever offer Paramount puts on the table, thanks to the terms of their existing merger agreement, Warner Bros. confirmed in a statement.
The market seemed to like the drama. In pre-market trading Tuesday, shares of both Warner Bros. Discovery and Paramount jumped 2.72% each, while Netflix traded 0.70% higher.
Apparently, Paramount had floated an informal proposal around $31 per share, which caught the attention of Warner Bros.' board. But don't mistake interest for acceptance. Warner Bros. Chairman Samuel DiPiazza Jr. and CEO David Zaslav made it clear in a letter to Paramount's board that the proposal hasn't been deemed superior to the Netflix merger. They're sticking with Netflix, at least for now.
The Battle Heats Up
This is just the latest chapter in what's becoming a proper Hollywood drama. Earlier this month, activist investor Ancora grabbed a stake in Warner Bros. and came out swinging against the Netflix deal, right as Paramount was upping the ante for the HBO owner. Paramount's sweetened bid came with some creative financial engineering: a "ticking fee" that would compensate shareholders for any regulatory delays, plus a hefty $2.8 billion termination fee payable to Netflix if the deal falls through.
Let's rewind to December, when Netflix agreed to acquire Warner Bros. studios and HBO Max for $27.75 per share, contingent on WBD spinning off its cable networks. That's when Paramount decided to crash the party with a hostile all-cash bid for the entire company—CNN, TNT, and all. It sparked exactly the kind of high-stakes bidding war you'd expect when major entertainment companies are in play.
So far, Warner Bros. Discovery's board has maintained its commitment to Netflix, arguing the deal offers better value and clearer regulatory pathways. But with Paramount pushing harder to win over shareholders and a one-week deadline now on the table, things could get very interesting very quickly.
