Netflix Co-CEO Greg Peters Critiques Paramount’s Debt while David Ellison’s Financier Calls Netflix Deal Misleading
Warner Bros. Discovery Merger Tensions Rise Amid Rival Companies’ Criticism
The competitive landscape for Warner Bros. Discovery (WBD) intensifies as executives from Netflix and Paramount publicly criticize each other’s merger proposals. As discussions heat up, key figures in both companies are engaged in a war of words over their competing strategies.
Netflix’s Co-CEOs, Ted Sarandos and Greg Peters, have been actively promoting the streaming giant’s $82.7 billion bid to acquire WBD’s studios and streaming division. Their engagement with major media outlets aims to bolster Wall Street’s confidence in Netflix’s direction as it navigates this high-stakes acquisition process.
In a recent interview with the Financial Times, Peters condemned Paramount’s hostile bid for WBD, asserting it “doesn’t pass the sniff test” due to the substantial debt involved. Responding to this criticism, Gerry Cardinale, head of RedBird Capital, a major supporter of Paramount, dismissed Netflix’s proposal as “smoke and mirrors."
Peters, although reiterating familiar arguments, did venture into new territory, stating, “Without Larry Ellison independently financing this thing, there’s no chance in hell Paramount would ever be able to pull this off,” referencing the co-founder of Oracle, who is wealthy beyond measure. Notably, Ellison’s son, David, serves as CEO of Paramount.
Concurrently, Paramount has taken steps to assert its influence, filing a preliminary proxy with the SEC to initiate a contest for control over the WBD board of directors. In its bid, Paramount has garnered support from only 7% of shareholders thus far. The company has extended its tender offer deadline to February 20, while WBD plans to convene a special shareholder meeting to vote on the proposal.
The main question on the table is whether Paramount will increase its offer, currently set at $30 per share. “If they were to move [higher], what kind of leverage would they have to have?” Peters questioned in the FT interview. He further expressed skepticism, suggesting that it “doesn’t pass the sniff test in my mind,” a sentiment echoed by WBD’s board and shareholders.
Cardinale’s rebuttal to Netflix centers on the company’s planned split of Discovery Global from the studios-and-streaming unit, arguing that the remaining segment would hold little value in today’s declining linear cable TV market. However, supporters of Netflix maintain that segments of Discovery, particularly CNN, could yield significant value if sold separately.
“Our leverage is nowhere near what they’re talking about,” Cardinale stated, labeling the Netflix transaction as “the Harry Houdini of deals” due to the substantial debt that would need to be transferred to Discovery Global.
Netflix shares have experienced a nearly 30% drop since it emerged as a contender for Warner, which could sway shareholders towards supporting Paramount’s offer. Peters acknowledged in the FT interview that speculation around the deal has weighed on Netflix’s stock, yet emphasized a focus on what the company can control moving forward. “Let’s keep moving things forward,” he noted.
