Activist investor and Warner Bros. Discovery shareholder Ancora Holdings threatened to vote ‘no’ on the Netflix deal and launch its own proxy fight if the WBD board does not engage with Paramount.
The David Ellison company Tuesday sweetened its hostile takeover offer for Warner in its latest attempt to derail the company’s agreement with Netflix.
The WBD board “now has no choice but to deem Paramount’s amended offer as one that could reasonably be expected to result in a Superior Proposal, given Netflix’s presently inferior proposal and unaddressed regulatory issues. Once that happens, the Board could then engage in good faith with Paramount to maximize shareholder value, paving the way for WBD to secure an even higher offer. If the WBD Board refuses to do this, Ancora will vote “NO” on the inferior Netflix deal and seek to hold the WBD Board accountable at the 2026,” the firm said in a presentation posted on its website.
“The WBD Board opted to rush into a flawed deal with Netflix rather than earnestly pursue a superior offer from Paramount – in line with the directors’ fiduciary duties,” it said. Ancora, a nearly $11 billion firm, said it has an approximately $200 million economic interest in Warner Bros. Discovery.
WBD noted yesterday that it’s considering Paramount’s revised offer, which has raised the heat on the board more than the Ellisons’ previous bids as it appears to address most of Warner’s concerns. Today it issued a second statement after Ancora jumped in, saying: “WBD’s experienced and independent Board and management team have a proven track record of acting in the best interests of the Company and shareholders – as evidenced by the extensive actions they have taken to unlock the full value of WBD’s unmatched portfolio of assets over the last year. We remain resolute in our commitment to maximize value for shareholders.”
“Paramount Skydance just made things more interesting…Could the WBD Board take PSKY more seriously? Is this potentially an elegant off-ramp for NFLX?” asks Seaport Research analyst David Joyce in a note. “Paramount Skydance rather materially just addressed most of the Warner Bros Discovery Board’s concerns with an economically enhanced offer for WBD shares.” Netflix shareholders have not been thrilled with the WB deal.
“Brilliant move by PSKY. Turns out this isn’t a Hail Mary—it’s a game of inches,” writes analyst Laurent Yoon of Bernstein. “In our view, PSKY needs to test NFLX’s pain threshold without having to bid too high. PSKY’s revised offer does exactly that, without further constraining its balance sheet (for now). The ball is now with NFLX.” PSKY and NFLX are the stock symbols for Paramount Skydance and Netflix.
Ancora was last heard of in media circles when it backed activist investor Nelson Peltz in his ultimately unsuccessful proxy fight against Disney in late 2022 and early 2023.
Paramount did not raise its $30-a-share cash bid but is injecting a new $0.25-per-share so-called “ticking fee” payable to WBD shareholders for each quarter its transaction has not closed beyond Dec. 31, 2026. It agreed to fund a $2.8 billion termination fee that would be payable to Netflix if WBD called things off. And it committed to work with WBD on debt financing costs and obligations.
RedBird Capital’s Gerry Cardinale, an investor in Paramount alongside the Ellisons, told CNBC the company has now “perfected” its offer “by taking off the table all of the, what I call more clerical items, that they have been using to suggest that they’re not going to engage with us.”
“So we made it very clear that, you know, we will fund the $2.8 billion breakup fee. If they terminate with Netflix, we will pay that immediately to Netflix. Take that off the table. That does not come out of what we’re paying to Warner Bros. shareholders in our $30 a share all cash offer. We will backstop the exchange offer that they need to execute by the end of the year, and if that fails, we will backstop paying the $1.5 billion fee that they owe to bondholders. So we’ve taken that off the table. “
Par is offering the $30 in cash for all of WBD. Netflix has agreed to buy the Warner Bros. studios and streaming assets for $27.75 in cash and, in a separate transaction, WBD would spin off its linear television assets into a separate public company called Discovery Global.
Paramount continues to pound on the spinoff as the weak link in the Netflix deal. WBD stockholders will receive shares in the new company that, depending on how they trade, could bridge the gap between the $30 and the $27.75., or not. Of course WBD and Paramount have differing projections on where Discovery Global will trade.
WBD’s debt, which exploded when Discovery acquired Warner Media four years ago, borrowing heavily to do so, has become a defining issue.
As the company splits in two, it will be allocating a portion of its its substantial debt to Discovery Global (possibly about $17 billion) and a portion to the studios and streaming, the business Netflix is buying. However, it has reserved the right to tinker with the amounts. If WBD decides to lighten the debt load on the cable company, the studio side would carry more debt and that could potentially change the cash consideration Netflix will fork out to WBD shareholders.
WBD has acknowledged this and uncertainty around the final payout is a major talking point for Paramount and its allies.
WBD’s board “cannot certify to Warner Brothers shareholders what the value of their deal is. They cannot. It is wholly predicated on where SpinCo [Discovery Global] ultimately trades. And the capitalization of that SpinCo is what will determine that,” said Cardinale.
Paramount “is proposing to give shareholders real financial certainty with $30 per share in cash,” Ancora said today.
Battle Heats Up
The latest fireworks follow an eventful last week. The Wall Street Journal reported that the Justice Department is looking at whether Netflix has engaged in anticompetitive tactics as it probes the streaming giant’s proposed acquisition of Warner. And co-CEO Ted Sarandos defended the deal at a combative hearing on Capitol Hill.
In an interview with Fox Business on Monday, Netflix chief global affairs office Clete Willems called the DOJ questions “ordinary course of business stuff.” The Department is said to have send a second round of queries to both Netflix and Paramount.
“Of course the Department of Justice is going to investigate this transaction and make sure it’s good for our economy and good for our consumers,” Willems said. He said Netflix is also in touch with State Attorneys general.
He insisted a Netflix deal is better for the U.S. economy and for jobs than that a Paramount merger given the streamer’s massive investment in content and, conversely, the magnitude of cost savings Paramount anticipates in what would be the biggest leveraged buyout in history. Par sees up to $6 billion in cost savings, much of which is expected to come from layoffs. Netflix envisions $2-$3 billion but Willems reiterated the savings would come mostly off licensing and other areas.
Paramount believes it has a cleaner and faster path to clear regulators.
President Donald Trump said recently he doesn’t think he should be involved in the DOJ review of the deal, reversing a previous statement.
Senators grilled Sarandos last week on topics from streaming dominance to the theatrical window to residuals to an alleged “political agenda.” Netflix has said that 80% of subscribers also subscribe to HBO Max and Willems said the company is “confident this deal will give consumers more value for less money.” Sarandos at the hearing said he committed “under oath” to a 45-day window for Warner Bros. films.
The ball is once again in WBD’s court as Wall Street and Hollywood await its response to Paramount’s amended offer. Warner will hold a special shareholder meeting relatively soon — it has indicated in SEC filings a still unspecified date in April (although there are reports floating around that it may be sooner) to vote on the Netflix deal. Paramount has extended its ongoing tender offer to Feb. 20. It’s asking WBD shareholders to tender, or hand over, their stock to Paramount, which is hoping to amass a big enough chunk to sway the process. WBD has been advising shareholders not to and reminding them that even if they have, they can withdraw the shares at any time.
