Netflix Might Lose Warner Bros. Discovery. That Might Be a Good Thing.
The biggest media M&A battle of the year just got more complicated. Warner Bros. Discovery's (“WBD”) board announced Wednesday that Paramount Skydance's revised $31/share all-cash bid "could reasonably be expected" to be superior to Netflix's existing deal. That's a significant shift as WBD has been backing Netflix for months.
How we got here
Warner Bros. Discovery has been a takeover target since its stock cratered following the 2022 merger of WarnerMedia and Discovery, which left the company loaded with debt and struggling to compete in the streaming wars. Netflix entered the picture earlier late last year with an acquisition offer that WBD's board initially embraced. But Paramount Skydance, which completed its own merger with Paramount Global last year, has been circling with increasingly aggressive counter-offers, and the latest one appears to have garnered the interest WBD's board.
What Paramount is offering
Paramount Skydance's sweetened offer values Warner Bros. Discovery at roughly $77 billion and comes with serious protections: a $7 billion reverse termination fee if regulators block the deal, plus full reimbursement of WBD's $2.8 billion break-up fee to Netflix. In plain terms, Paramount is telling WBD shareholders: we'll pay you more, and if the deal falls apart, we'll cover your costs. That's a compelling pitch.
Netflix will have four business days to match or improve its offer, or walk away. A shareholder vote on the existing Netflix deal is scheduled for March 20.
Why walking away might be Netflix's best move
Analysts say Netflix could financially afford to raise its bid. But the smarter question is whether it should. Netflix has built its dominance by investing in original content and global expansion, not by acquiring legacy media companies with complicated cable TV businesses, theme parks, and studios that come with significant debt. Overpaying for Warner Bros. Discovery to win a bidding war could saddle Netflix with exactly the kind of old-media baggage it spent a decade avoiding. Sometimes the best deal is the one you don't make.
Sources: CNBC, Bloomberg, Yahoo Finance