The Battle for Warner Bros. Discovery Enters Its Final Act

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The high-stakes contest to acquire Warner Bros. Discovery (WBD) is reaching its climax. Investors are bracing for a pivotal week that could reshape the competitive landscape of the media industry. While Netflix shares saw modest gains on Friday, all attention is now fixed on Monday, February 23rd. This is the deadline for rival bidder Paramount Skydance to submit its "best and final" offer.

Paramount Skydance attempted to gain momentum last Friday by announcing that the waiting period for U.S. antitrust authorities regarding its $108.4 billion bid had expired. The company framed this as the removal of a key regulatory hurdle.

Netflix responded swiftly and with force. The company's Chief Legal Officer, David Hyman, clarified that the lapse of a routine review period does not equate to a "green light" from the Department of Justice (DOJ). He emphasized that the DOJ retains the authority to challenge transactions after the fact, a point underscored by the blocked JetBlue-Spirit merger in 2023. This statement served as a clear signal that Netflix believes significant regulatory obstacles remain for its competitor.

A High-Stakes Bidding War

The core of the conflict revolves around two distinct proposals:

• Netflix's Offer: A cash bid of $27.75 per share, valuing the deal at approximately $82.7 billion. Netflix is primarily interested in WBD's studio and streaming assets.
• Paramount Skydance's Offer: A bid of $30 per share, totaling $108.4 billion, aiming to acquire the entire conglomerate, including linear TV networks like CNN.

Netflix holds a strategic financial advantage. With over $9 billion in cash reserves and secured credit lines amounting to $42.2 billion, the company has the capacity to quickly enhance its all-cash offer should Paramount Skydance raise its bid.

Internal Support Leans Toward Netflix

Despite the nominally higher value of the competing proposal, WBD's management continues to favor a deal with Netflix. Concerns surrounding Paramount Skydance's bid are significant, including uncertainties over financing and doubts regarding the equity commitments from Larry Ellison.

Sentiment within Warner Bros. Discovery's workforce has also shifted. Many employees prefer the Netflix plan, which is seen as more likely to preserve the studios' brand identities. In contrast, Paramount Skydance has projected synergies of up to $6 billion?a figure widely interpreted by analysts and staff as a precursor to substantial job cuts.

The market has reacted with cautious optimism. Netflix stock closed at $78.67 on Friday, though it remains roughly 8.6% below its level prior to January's quarterly earnings report.

The final decision is imminent. If Paramount Skydance improves its offer on Monday, Netflix has a contractual four-day window to launch a counteroffensive. The ultimate timeline is already set: Warner Bros. Discovery shareholders will vote on the merger on March 20th.