S&P U.S. Media Takes Charge in the WBD Competition – The Importance of Quick Decisions
Naveen Sarma, Managing Director and Sector Lead for U.S. Media and Telecom at S&P Global, emphasized the urgency of completing mergers and acquisitions in the media sector. “The biggest challenge to take away from past M&A in media is the environment moves really quickly,” he stated. “If you wait two years, or two-and-a-half years … the ecosystem’s changed a lot.” His remarks came during a Q&A session at the UBS Media Conference in New York, where he discussed the current situation surrounding Warner Bros. Discovery (WBD).
WBD announced its intention to sell itself in October and recently reached a deal to sell its studios and HBO Max to Netflix for $27.75 in cash and stock. Meanwhile, Paramount, which has made six unsuccessful bids for WBD, launched a hostile tender offer on Monday morning, offering $30 in cash for the entire company. WBD must respond within ten days.
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Sarma noted the ongoing competition, highlighting that Netflix “has a lot more capacity” to adjust its bid if necessary. He also pointed out that Paramount would face greater challenges in escalating its offer. However, he suggested that if David Ellison were to seek additional support from his father, Larry Ellison—co-founder of Oracle and one of the wealthiest individuals globally—Paramount might bolster its capacity. The equity portion of Paramount’s bid includes investments from three Middle Eastern sovereign wealth funds and Jared Kushner’s investment firm, Affinity Partners, supported by the Ellison Trust, ensuring financing is secure.
Wall Street analysts believe Netflix has less to lose by adopting a patient approach than Paramount, which is already contending with declining linear television. “In two years, Netflix will still pretty much be Netflix,” one analyst noted.
Despite the challenges, Ellison has been actively reassuring stakeholders of Paramount’s up-to-date strategy for approval, which will undergo review by the Department of Justice. He has aggressively promoted the case for the tender offer through various public and private engagements, although he withdrew from a previously scheduled main-stage Q&A session. The deadline for investors to tender their shares is set for January 8, but there is potential for an extension.
Ellison highlights the apparent antitrust complications posed by a Netflix-HBO Max merger, while Netflix argues that streaming video encompasses a wide market with competitors like YouTube and TikTok. Netflix co-CEOs Ted Sarandos and Greg Peters recently appeared at the UBS conference, expressing confidence in the success of their offer.
Observers, including Candle Media’s Kevin Mayer—a former Disney executive and TikTok CEO—believe turbulent times lie ahead. Mayer predicted “fireworks” in the competitive landscape, suggesting potential for increased offers, legal challenges from Paramount, a proxy fight, or a combination of all three.
Sarma was among the first to publicly flag risks to Paramount’s credit-worthiness at the same UBS event last year, having foreseen upheaval within the company before its acquisition by Skydance.
