Not so fast Netflix... WBD gets another offer

December 8, 2025

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Summary

It’s Merger Monday — the sequel to Merger Friday.  This morning, Paramount Skydance (PSKY) announced a tender offer to buy Warner Brothers Discovery (WBD) for $30/share.  If accepted by shareholders, this would overrule the board’s decision to sell to Netflix last week.  

And just to make it a little more interesting, Jared Kushner, the President’s son-in-law is one of the investors sponsoring the Paramount deal.

Honestly, this is really exciting.  You almost never see this type of massive bidding war for a company the size of Warner Bros.  Add on all the personalities involved, and you have an Oscar-winning story on your hands.

Old Hollywood goes digital, part 2

Now is the part of the movie when educated and previously reasonable people just lose their minds.  

Not willing to ride gracefully off into the sunset, Paramount made a counter-offer for all WBD shares at $30/share ($108.4 billion).  And they made a blistering presentation this morning about how their offer is superior to the Netflix offer.

As a reminder, last week, after a months-long bidding war, the WBD board of directors picked Netflix’s offer to buy the company.  However, the board is only the representative of the shareholders.  The shareholders actually own the company.  So rather than giving up gracefully, Paramount is making its case directly to the people (i.e., the shareholders).  Paramount is submitting its $30/share offer directly to the shareholders via what’s called a “tender offer”.  

The shareholders now effectively have two choices:

(1) Netflix’s offer for $27.75(ish) per share PLUS a share of the new cable channel tracking stock

(2) Paramount’s offer for $30 per share

Which one is better?  To be honest, I have no idea.  Neither does anyone else.  No one can know with certainty what will be the market value of the new cable channel stock until it starts trading.  

(Disclaimer: there are nuances to all this that I’m glossing over.  But I’m summarizing for the sake of brevity.  If you’d like to dive deep, I’m happy to discuss.)

But there’s one area where Paramount has a distinct advantage.   Regulatory approval.   By law, the Department of Justice must review any merger over a certain size.  The point is to see if the deal violates anti-trust law and harms consumers.  If DOJ thinks the deal is bad, they either negotiate or take the companies to court to stop the deal.  The judge will decide if the deal violates anti-trust law or not.

So the DOJ does not have “veto” power.  (A judge could rule against the DOJ and allow the merger to go through.)  But DOJ does have the power to DELAY.   They could push the approval process back by a year or more, if they want.

If you’re a merger arb fund, a quicker closing is very much in your best interest.  You get your profit sooner.

And these days, the DOJ is heavily influenced by the President.  If President Trump decides that he prefers Paramount as owner of WBD, he could ask AG Bondi and the DOJ to end their review early and let it go through.  

An earlier closing and $30/share in cash might be enough to push the majority of the shareholders over the edge into the Paramount column for the win.

So how will this all work?

The board’s agreement with Netflix will be subject to a shareholder vote.  But their vote wont happen for 5-6 months.  A tender offer is a much more direct animal, however.

The WBD will take 10 days and review the PSKY offer.  After that, it will go to the shareholders to vote.

The WBD shareholders will receive a notice from their broker in the next couple weeks.  This notice will ask if they want to accept the Paramount offer for $30.  Now, this is important: Paramount has until Jan 8th to get a majority of the votes.  If they get a majority of the shares, Paramount wins.  If not, the Netflix deal goes on as planned.  So over the next few weeks, Paramount will embark on a PR blitz aimed at WBD shareholders (big and small, alike) convincing them to click “yes” on that voting card.

The sequel is more exciting than the first movie!  In the Paramount presentation this morning, they even included a list of quotes from over the weekend.   This was just a summary of the various people who spoke out against a Netflix acquisition.  I copied it below just for fun.

So how are the stocks reacting?

This morning, WBD stock is up 4%ish to $27ish.  And Paramount (PSKY) is up +9%ish.  I get why WBD stock is up.  But PSKY going higher is a bit of a head-scratcher.  PSKY is almost certainly overpaying for these assets.   Stocks of big acquirers almost always go DOWN on big merger news.   So what’s up here?  Perhaps PSKY is being bought up aggressively by fans of the President and his allies?  (That’s certainly been a winning trade this year.)  Honestly, that’s my best guess at the moment.

On the other side, Netflix got a downgrade from Pivotal research this morning.  They had several reasons.  But this was the most compelling one to me:  “We believe this very expensive deal highlights NFLX management’s concern that short form entertainment (TikTok, Insta, X, YouTube shorts and Snap) is doing to streaming what streaming has done to traditional TV as (especially younger) consumers spend an increasing amount of time on these free platforms amidst declining attention spans (which is fundamentally negative for long form content)”.  

Now that’s honestly something I hadn’t considered.  Are Tik-Tok and Instagram secular threats to streaming businesses in 5 years?  10 years?  Something to consider in the broader media space as well.