Paramount Skydance and its deep-pocketed owners David and Larry Ellison may not have to get that “hostile” to thwart Warner Bros. Discovery’s merger with Netflix, On The Money has learned.
In the days since Netflix won the auction with its $72 billion bid for the Warner Bros. studio and HBO Max streaming service, WBD’s wily CEO David Zaslav has signaled to close associates he can envision the Ellisons upending the monster deal with a higher bid, sources said.
Specifically, Zaslav sees an agreement in which the Ellisons raise their bid enough to cover the $2.8 billion breakup fee that WBD would face if it walks away from the Netflix deal, according to people with direct knowledge of the matter.
“(Zaslav’s) thinking is that the Ellisons could come back with $35 all cash that covers the $2.8 billion break up fee,” said one person with direct knowledge of the WBD chief’s thinking. “And then he has to get in a room and decide which offer is best for shareholders, and the Ellisons own it.”
A rep for Zaslav had no comment. WBD said it is reviewing the renewed offer and will make a decision in 10 days. A spokeswoman for the Ellisons declined to comment.
David and Larry said Monday morning that they are going above Zaslav and his board with a so-called hostile offer to the company’s shareholders. They believe their $30-a-share, all-cash offer was superior to the cash-and-stock, bells-and-whistles bid provided by Netflix – arguing that it surpassed theirs by a mere 75 cents a share while carrying numerous drawbacks and question marks for WBD shareholders.
Zas, as he is known in media land, is said to have seen the Ellisons’ intentions coming. He knows the Ellisons – Larry in particular, who has amassed a fortune of more than $250 billion with his dealmaking prowess in Silicon Valley – weren’t going away quietly. That’s when he sent out word that for a few more bucks, WBD could be theirs, these people add.
How much Ellisons are willing to raise their bid is unclear. Monday morning, David Ellison said he would have gone higher than his $30 a share offer before WBD announced Netflix the winner at $30.75 . But in going hostile, he is signaling to WBD shareholders that he and his father’s all cash bid of $30 a share, or $78 billion, is still superior to Netflix’s $27.75 a share offer.
Netflix’s bid, they note, includes 15% stock, while relying on anywhere from $2 a share to $4 a share extra from the eventual sale of WBD’s cable properties, Discovery, TNT, CNN. Indeed, they argue, $3 a share is likely a generous valuation for those shrinking assets.
Netflix is buying just WBD Warner studio and HBO Max streaming service; the Ellison’s want everything including the cable channels. They will tell shareholders that the Netflix deal contains something known as “tax leakage,” or an adverse tax event because their company is essentially being broken apart and that too will depress their all-in price.
People inside Paramount Skydance believe that the board was unaware that it would be willing to bid higher than $30 because Zaslav wanted to seal the deal with his close friend, Netflix CEO Ted Sarandos.
Most of all they will argue “regulatory certainty.” As reported, Larry Ellison is a close friend of president Trump, a long time MAGA supporter. But more than that, as The Post first reported, Trump’s antitrust cops in the Justice Department are wary about Netflix’s growing power in the market for streaming programming, a growing business that increasingly large numbers of Americans rely on for entertainment.
Netflix is the streaming leader with 300 million subscribers, while HBO Max is the third largest with 100 million. The so-called horizontal merger will create a streaming colossus covering some 30% of the streaming market place, and combined with a top notch studio, having significant monopolistic pricing power, senior Trump administration officials say.
Zaslav has told people he believes the Netflix deal would eventually get approved following, as The Post reported, a face-to-face meeting between Sarandos and the president, who appeared to swayed by the argument that Netflix doesn’t have a monopoly and never will because so much entertainment is consumed via platforms like YouTube and social media.
People inside the Trump administration say the president was noncommittal on the antitrust aspects of Netflix deal but was gracious in his meeting with Sarandos, and that the WBD people shouldn’t take that as a regulatory greenlight.
“Warner Bros. has a better chance collecting its break up fee from Netflix than getting this deal through,” is how one Trump administration official put it. For its part, Netflix has agreed to pay the company $5.8 billion if it has to walk away, more than double the amount that WBD will pay if it decides to call it quits with the streaming giant.
Netflix has other issues; on Monday its shares continued to slide, underscoring investor skittishness about a major purchase that so far the company has avoided. People close to the deal say that the decline in share price could impact the so-called collar on the stock portion of what it has agreed to pay WBD, meaning it might have to put up more money.
David Ellison, meanwhile, ran into Trump Sunday night, at the Kennedy Centers Honors that Trump himself hosted, the first president to do so. Trump was seated with his wife Melania, alongside House speaker Mike Johnson, and a few seats away from the younger Ellison and his wife.
Ellison and Trump were spotted chatting; a source says David Ellison gave the president a heads up that the hostile bid was coming in a few hours. Trump appeared to return the favor during a press conference at the event when he asked whether Netflix should be allowed to buy WBD. “That’s a question. They have a very big market share. I’ll be involved in that decision.”
Still, hostile takeovers are arduous and expensive. Yes, the Ellisons have the money. Larry Ellison is backstopping the bid and the appeal to shareholders. He could also write a check that could easily throw Zas another $5 a share that covers his breakup fee and forces Netflix – a $400 billion company, albeit with deal-squeamish public shareholders – to capitulate.
And Zas will be all ears.
