Paramount has decided to make a big splash by approaching Warner Bros. Discovery’s shareholders with a full cash offer, trying to take control of one of the most coveted treasures in Hollywood—an aggressive move that could be seen as retaliation against Netflix, which just clinched a deal for the company.
Despite expectations that Paramount would be the main contender for Warner Bros. Discovery, the board opted for Netflix’s proposal, which they deemed superior financially. This surprise pick took many in Hollywood off guard, including David Ellison, the CEO of Paramount, who argues that his proposition is indeed more favorable.
According to Ellison, speaking in a recent interview with CNBC, “We’re in an arena where cash rules supreme. We’ve put forth an offer that gives $17.6 billion more in cash to shareholders than their standing agreement with Netflix. We firmly believe that when they review what we have on the table, they’ll choose us.”
Paramount’s bid stands at $30 per share in cash for the entire company, against Netflix’s offer of $27.75 per share, which combines $23.25 in cash and $4.50 in stock.
It’s a tangled situation—Netflix insists that when Warner Bros. Discovery’s cable assets, like CNN, which aren’t part of Netflix’s deal, are eventually spun off, their value will soar, making their offer more worthwhile in the long run.
While Paramount wishes to acquire Warner Bros. Discovery entirely, they estimate their total offer to be around $108.4 billion, considerably higher than Netflix’s $82.7 billion, which does not factor in the value of Warner’s cable channels.
The WBD board’s decision to accept Netflix’s invite last week reignited speculation about the cable assets being more lucrative when independent, rather than merged with HBO and the other movie and streaming properties, hinting at unlocking more shareholder value.
On Monday, Paramount emphasized that WBD’s shareholders are entitled to weigh their options.
“WBD shareholders should have the chance to deliberate over our superior all-cash deal,” read Ellison’s statement. “What we’re offering aligns with the terms communicated to the WBD Board of Directors privately and offers a better value, with a clearer path to a quick closure. We believe the Board of Directors is on an inferior track with Netflix.”
As this drama unfolds, WBD shares jumped by 7% to nearly $28 on Monday due to excitement about potential bidding wars, laying the groundwork for Netflix to possibly step up with an added offer in response to Paramount’s play. Meanwhile, stock for Paramount rose by 4%, while Netflix’s dropped more than 3%.
Should Warner Bros. Discovery lean towards Paramount’s proposal, they incur a substantial $2.8 billion breakup fee to Netflix.
Paramount’s Call to Shareholders
Ellison puts forth the claim that his proposal not only offers greater overall value to WBD shareholders but also has better prospects for winning the regulatory nods. He cautions that Netflix’s offer fusing the number one streaming service with HBO Max, which holds the number three position, risks attracting unfavorable scrutiny from antitrust regulators.
Ellison has highlighted positive interactions with President Trump, who has verbalized a good rapport with Netflix’s co-CEO Ted Sarandos.
“I feel fortunate to have developed a relationship with the President,” Ellison mentioned in his CNBC dialogue. “What’s vital in today’s marketplace is competition. To combine the leading streaming service with the third highest raises concerns about market fairness.”
Netflix asserts that its deal would withstand regulatory investigations, ready to defend against Paramount’s market arguments with different statistics: Nielsen reports show Netflix accounts for 8% of total TV viewing time, a hair behind Paramount’s 8.2%, with Netflix riding at number six on the Nielsen ladder, juxtaposed to YouTube and Disney at the top positions.
Ellison critiques Netflix’s logic as flawed, drawing an analogy about major soda brands potentially merging over drinks in different markets.
He appealed directly to consumers and industry peers, asserting that the Netflix-WBD arrangement might lead to the decline of theatrical films in Hollywood. “This isn’t just a liability for consumers; it threatens the whole creative workforce,” declared Ellison, expressing a desire to safeguard the industry.
Ellison’s Vision for the Future
Ellison elaborated on his ambitions for producing a robust rival to Netflix and Disney, aiming to enhance Hollywood’s richness. He proclaimed that Paramount’s offer would provide better backing to the creative community compared to a Netflix monopoly that he claims would minimize competition.
“After a decade and a half in film production, this industry holds a place in my heart. It’s critical we act here since what we propose is favorable for Hollywood and for our viewers while enhancing competition,” he stated on CNBC.
Ellison thinks that acquiring Warner Bros. Discovery will give rise to healthier competition, making the entertainment landscape more vibrant. “We’re the ones enabling more films to reach audiences—30 features a year, which will premiere solely in theaters,” he chimes.
Positioning himself as an unsought benefactor of Hollywood, Ellison has plunged significant investments into Paramount just as he stepped into his role.
Although his political lens mostly aligns center-left, he has shown signs of affinity for Trump recently, notably attending events together while also agreeing to the terms set for acquiring Paramount last August. Furthermore, he’s making plans to revamp CBS News, investing substantially in right-leaning journalism initiatives under Bari Weiss’s guidance, a move that Trump appears to endorse.
Talking future strategies, Ellison indicated the merging of CBS News with CNN would be part of Paramount’s broader objective.
“Our intent is to create a trustworthy, substantive news service that resonates with the 70% centrist Americans,” shared Ellison. He noted productive discussions with Trump regarding the news endeavor, but wished to refrain from misrepresenting Trump’s views, particularly given that his son-in-law is also involved in funding these transactions.
Partners in this initiative include investor groups such as Saudi Arabia’s Public Investment Fund, kingdom-based Qatari entities, and Jared Kushner’s Affinity Partners which, alongside the substantial investments from the Saudi sovereign fund, are likely not to engage in board duties to avoid national security alarms should the deal be finalized, as Paramount reported on Monday.
Additionally, Ellison revealed that his father, Larry Ellison, the chairman of Oracle and one of the richest figures globally, is quietly stepping in with an undisclosed equity amount to secure liquidity for the venture, a portion he says is fully covered.
This article has been modified with further information and insights.
Noteworthy contributions to this report were made by CNN’s Brian Stelter.
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