Hours before Warner Bros. Discovery (WBD) agreed to sell its assets to Netflix, Ted Sarandos, Netflix’s co-CEO, informed WBD’s CEO, David Zaslav, that Netflix wouldn’t increase its bid. This has now opened a window for WBD shareholders to weigh their options.
WBD shareholders have until January 21 to tender their shares to Paramount for $30 each. This deadline could be extended. If Paramount acquires 51% of WBD, it would gain control, even though WBD’s board has backed the Netflix deal. This scenario raises a tricky question for shareholders: should they support Paramount or stick with Netflix’s offer?
To Tender or Not
There are good reasons for shareholders to consider tendering their shares. Paramount is offering $30 per share in cash. In contrast, Netflix’s bid stands at $27.75 per share and is more complex, involving a mix of cash and stock that could create uncertainty about its final worth.
In a recent commentary, David Ellison, CEO of Paramount Skydance, stated he values WBD subsidiary Discovery Global at just $1 per share. He’s suggesting that Paramount’s offer is superior since it may face fewer regulatory hurdles than Netflix’s.
Concerns about competition have been raised following Netflix’s global expansion, which boasts over 300 million paying subscribers. Lawmakers worry that merging Netflix and HBO Max could create an unfair market. In contrast, Paramount+ has a more modest subscriber base of around 80 million, making its merger appear less concerning from a regulatory perspective.
However, some shareholders might prefer not to tender their shares. They could argue that refusing Paramount’s offer might ignite a bidding war, prompting both companies to raise their bids. Mario Gabelli, chairman of GAMCO Investors, has mentioned that a competitive process like this is beneficial for shareholders.
Looking Ahead
Historically, the media landscape is shifting. With increasing competition among streaming services, the dynamics affecting today’s shareholders echo past bidding wars in various industries. For example, in the tech sector, similar situations led to companies revising their offers, resulting in better deals for shareholders.
As shedding light on the current landscape, it’s essential to note that many shareholders are analyzing this situation through social media and finance forums, contemplating the best approach amid this financial chess game.
Conclusion
In the coming weeks, as the January deadline approaches, shareholders will be evaluating their choices closely. The potential for a bidding war means that both Paramount and Netflix may be incentivized to push their offers higher. This is a pivotal moment for WBD, and shareholders will need to decide which path offers the greatest value.
For authoritative insights into the fast-changing media space, readers can refer to the CNBC report for real-time updates and analysis.
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