⛰️ Just when the dust had settled, the bidding war for Warner Bros. reached its boiling point. Yesterday, just three days after Netflix announced its binding agreement, Paramount Skydance launched a hostile takeover bid for the entirety of Warner Bros. Discovery, valued at USD 108.4 bn. Cashmoney.

This is a takeover of the finale of our three-part series on Netflix’s acquisition of Warner Bros. Read part one here for the business breakdown, and part two here for what that means for the industry.

Unlike Netflix’s agreement, which excluded Warner’s cable networks (CNN, TNT, TBS), Paramount’s all-cash offer of USD 30 per share comprises the whole company. It’s a dramatic escalation that bypasses Warner Bros. Discovery’s board of directors entirely, taking the offer directly to shareholders in what CEO David Ellison called an effort “to finish what we started.”

The barbarians are at the gate: A hostile takeover attempts the acquisition of a company by an unsolicited buyer against the explicit wishes of its board of directors. Rather than negotiating with management, the acquiring company appeals directly to shareholders, betting they’ll accept a better offer regardless of what the board recommends. Journalists and authors Bryan Burrough and John Helyar characterize it the same way the ancient Romans characterized foreign attackers against their empire, and Ted Forstmann characterized Henry Kravis during the 1988 leveraged buyout of RJR Nabisco — “barbarians at the gate.”

Burrough and Helyar’s account of the drama of corporate warfare that resulted from the Nabisco buyout remains the gold standard for understanding how hostile takeovers unfold, and may be the key to understanding the one currently in attempt by Paramount Skydance.

A timeline of rejection: Paramount’s hostile bid was “rooted in what it considered a lack of responsiveness from Warner Bros,” according to a detailed securities filing. The filing reveals months of increasingly desperate overtures from David Ellison to Warner Bros. Discovery CEO David Zaslav. Paramount submitted its first bid in September, followed by two improved offers that were rebuffed. The Ellisons — David and his father Larry, Oracle co-founder and the world’s second-richest man — dined with Zaslav on 24 November to discuss the benefits of a deal, and potential co-CEO and co-chairman roles for Zaslav in the combined company.

The Succession of it all. On 3 December, two days before Netflix’s announcement, Zaslav called Ellison to relay the board’s concerns about Paramount’s bid, specifically the absence of a full backstop from the Ellison family. The next day, after a board meeting where Paramount agreed to improve its offer, Ellison texted Zaslav: “I heard you on all your concerns and believe we have addressed them in our new proposal. Please give me a call back.” Paramount sweetened its bid to USD 30 per share — USD 108.4 bn in total — and told Warner Bros. that this was “not best and final,” signalling they could go higher. Ellison tried again at 4pm EST with a personal appeal: “It would be the honor of a lifetime to be your partner.” But Zaslav never called back. By 11pm, media reports confirmed that Warner Bros. had entered exclusive talks with Netflix.

The pitch? “A stronger Hollywood.” Paramount is using a multi-prong approach, first offering USD 17.6 bn more than Netflix — USD 30 per share all-cash versus Netflix’s complex mix of USD 23.3 in banknotes and USD 4.5 in stock, subject to collar adjustments based on Netflix’s future stock performance. Second, Paramount promises Warner Bros. and (and the incensed public) a theatrical commitment, vowing to release more than 30 films theatrically per year and honor “healthy traditional windows,” a direct swipe at Netflix’s two-week theatrical strategy.

To dispel anti-trust attention, Paramount also argues that its deal is more pro-competitive. On an investor call yesterday, Ellison noted that Paramount+ and HBO Max combined would have approximately 200 mn global subscribers, putting them “on par with Disney,” versus a union with Netflix and HBO Max, which will amass an untenable 400 mn subscribers total. “We really view this as, our deal is completely pro-competitive. It’s pro-creative talent, pro-consumer, as opposed to the combination with Netflix which would give them such a scale that it would be bad for Hollywood and bad for the consumer.”

Paramount even launched a website to make its case, positioning itself as Hollywood’s savior against Netflix’s dominance.

Who are Hollywood’s alleged saviors? Paramount’s bid is backed by a coalition of the Ellison family, RedBird Capital Partners, and — controversially — multiple Middle Eastern sovereign wealth funds and presidential son-in-law Jared Kushner’s Affinity Partners. David Ellison reportedly attended Trump’s Kennedy Center Honors event just hours before announcing the hostile bid. Ellison has repeatedly touted his friendlier path to regulatory approval, citing Paramount’s recent successful merger with Skydance and the company’s close ties to the Trump administration, calling the US president a believer in competition, arguing that the merger would create “a real competitor to Netflix, a real competitor to Amazon.”

Paramount also promptly dropped Chinese tech firm Tencent from its investor group and secured waivers on all governance rights from outside investors — a structure designed to avoid scrutiny from the Committee on Foreign Investment in the US.

But Netflix remains unbothered. Co-CEO Ted Sarandos said that the hostile bid was “entirely expected” and that Netflix remains “super confident” its deal will close. He also took a shot at Paramount’s promised USD 6 bn in cost-saving synergies: “Where do you think synergies come from? Cutting jobs.” The Warner Bros. Discovery board released a statement saying it would “carefully review and consider Paramount Skydance’s offer” and issue a decision within 10 business days — by Friday, 19 December. But for now, the board “is not modifying its recommendation with respect to the agreement with Netflix,” and advised shareholders to “take no action at this time.”

Market reax: Warner Bros. Discovery shares rose about 4% yesterday following Paramount’s announcement. Netflix’s fell by 3% while Paramount gained 9% — a market signal that investors see Paramount’s bid as credible, and perhaps voting with their wallets.

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