Warner Bros Discovery Inc. (NASDAQ: WBD) remains steadfast in finalizing its merger with Netflix Inc. (NASDAQ: NFLX), as stated by Chairman Samuel DiPiazza during his recent appearance on CNBC’s "Squawk Box." This firm stance comes amid a competitive approach from Paramount Skydance Corp. (NASDAQ: PSKY), which has recently intensified its bid with backing from Oracle co-founder Larry Ellison. Despite Ellison's commitment, DiPiazza emphasized that Paramount's offer has not presented any price increase over the existing Netflix agreement.
DiPiazza elaborated on the Warner Bros management team’s rationale for remaining aligned with Netflix. He pointed to the binding nature of the "signed merger agreement" and characterized the transaction as offering "compelling value" to shareholders. An important element underscored was the inclusion of significant protections for shareholders, designed to secure interests should any unforeseen barrier emerge that could prevent completion of the deal.
While acknowledging Larry Ellison’s notable involvement and financial commitment to propel the Skydance bid, DiPiazza reaffirmed that the competitor’s proposal remained deficient in critical aspects. He stated plainly, "Ultimately, he didn't raise the price," indicating the management team’s viewpoint that Netflix’s tender remained the superior offer in terms of value proposition and deal certainty.
Concerns have surfaced regarding possible regulatory obstacles, particularly in the European markets, that might delay or derail the merger process. DiPiazza addressed these apprehensions directly, expressing confidence that both Netflix's and Paramount’s transactions have credible pathways toward regulatory approval. Nevertheless, he expressed caution regarding the leveraged buyout structure proposed by Skydance, pointing out the broader stresses currently affecting the sector. Notably, he highlighted potential challenges in refinancing debt and uncertainties about market conditions over the 15 to 18-month horizon, which could materially impact financial stability post-merger.
Further strengthening Netflix’s position, DiPiazza cited the involvement of a stable investment-grade company valued around $400 billion, underscoring the financial robustness and reliability underpinning the deal. He also referenced a $5.8 billion break fee stipulated in the agreement, designed as a financial safeguard in case the transaction is aborted for any reason, and described it as effectively unassailable.
Despite these reassurances, the merger faces formidable antitrust scrutiny. Influential critics, including Matt Stoller from the American Economic Liberties Project, have voiced concerns that the deal may pose significant market distortions, labeling it a potential calamity for the American entertainment marketplace. Such criticism highlights fears that the consolidation could exert excessive control over theatrical film distribution channels.
This skepticism is shared among various U.S. lawmakers and Hollywood union representatives, with apprehensions about market concentration leading to bipartisan resistance. Even former President Donald Trump has declared that he intends to play an active role in reviewing the proposed merger, remarking on the combined entity's substantial market share and the possible regulatory complications arising from such dominance.
In trading activity surrounding these developments, Warner Bros Discovery’s shares exhibited modest fluctuations. On Wednesday, the stock closed up slightly by 0.30% at $28.56 but experienced a decline of 0.73% during overnight trading. The company’s stock performance benefits from strong momentum indicators and displays a favorable price trend across short, medium, and long-term timeframes, according to Benzinga’s analytics.
The competitive landscape for this high-profile transaction remains dynamic, with Netflix’s proposal bolstered by contractual certainty and shareholder protections, while Paramount’s rival bid stokes heightened competition backed by prominent investors. Warner Bros Discovery’s leadership continues to advocate for the Netflix merger, citing superior price terms and a more straightforward closing process despite the challenges on the regulatory front.