Just days after Netflix (NFLX 3.44%) and Warner Bros. Discovery (WBD +4.41%) agreed to a blockbuster $72 billion deal to buy most of the company's assets, there's now a twist.
Paramount Skydance (PSKY +9.02%), which was believed to be the original frontrunner, is going directly to shareholders with a hostile takeover offer. Paramount is offering a slightly higher price for the entire business, which includes cable channels like CNN and TNT and the Discovery business. The Netflix offer was for the film studios, including Warner Bros., HBO, and the HBOMax streaming service with the remainder of WBD being spun off into a separate entity.
Paramount is offering $30-a-share for the company, valuing WBD's equity at $77.9 billion, or $108 billion including debt. That compares to $27.75 a share that WBD would get from Netflix. The Paramount bid is also all cash, while Netflix had offered $23.50 in cash, with the remainder coming in stock.
Image source: Getty Images.
What it means for investors
The Paramount proposal further complicates a deal that was already expected to face significant regulatory scrutiny.
Investors should understand that both boards of directors have agreed to the Netflix deal, which is why Paramount is going directly to shareholders, who may get an opportunity to vote on the proposal.
Warner Bros. Discovery stock ticked higher on the news, trading up 4% in early afternoon trading. The gain isn't surprising, given the higher offer, and the takeover bid is a good sign for WBD shareholders, though even after the gain, it's still trading below Netflix's $27.75 offer. If WBD terminated the Netflix deal, it would have to pay Netflix a fee of $2.8 billion.
Netflix stock fell on the news, slipping 4%, which comes in addition to a 3% drop on Friday when the deal was announced, showing investors are unhappy for multiple reasons. WBD's takeover bid could further complicate the regulatory process for Netflix, which has already raised antitrust concerns. If WBD accepted the Paramount offer, Netflix could come back and offer more money for the business.
NASDAQ: PSKY
Key Data Points
Paramount stock, meanwhile, jumped on the news, trading up as much as 10% on Monday. The stock tumbled 10% on Friday as it was seen as the loser in the Netflix deal, but the takeover bid seems to be giving Paramount shareholders some hope.
Overall, it's hard to predict where this battle will go next as the stakes are high and the merger could change the future of Hollywood. Investors in all three of these stocks should expect more volatility. Even if Netflix emerges victorious, getting through the regulatory process won't be easy.
