On Friday, Netflix announced it was buying Warner Bros for $US72 billion ($AU125 billion).
In the joint announcement, the two companies said the acquisition “brings together two pioneering entertainment businesses”.
On Tuesday, we woke up to news that Paramount has made a bid to acquire Warner Bros.
But wasn’t the deal already announced? How can a company bid to buy another company if they don’t want it?
Let’s unpack.
Netflix deal
On Friday, Netflix announced it was acquiring Warner Bros.
Under the agreement, Netflix would buy Warner Bros’ film and television studios, as well as HBO Max and HBO.
The cable arm of the business, which includes CNN, would be carved out as a separate business outside of Netflix’s control.
The announcement said the deal was “unanimously approved” by the boards of Netflix and Warner Bros.
Both companies said the deal would be completed in 12-18 months, once the cable arm of Warner Bros had been split off.
The statement also confirmed that completion of the transaction required sign-off by federal government agencies.
Warner Bros CEO David Zaslav said the deal “combines two of the greatest storytelling companies in the world to bring to even more people the entertainment they love to watch the most.“
Paramount
The process of acquiring Warner Bros. didn’t actually start with Netflix.
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International media reports it began when Paramount, owned by billionaire Larry Ellison, made several unsolicited bids to acquire the company.
These bids were rejected by Warner Bros’ board and weren’t made public.
It’s reported that both Paramount and Netflix made offers in recent months to purchase Warner Bros.
Ultimately, the announcement on Friday was an indication that Warner Bros had accepted Netflix’s bid over Paramount’s.
So, if both companies had announced the acquisition and Netflix’s bid had been successful, why is there now news of a Paramount offer?
Overnight, Paramount launched something called a “hostile takeover bid”.
That means an attempt to take control or acquire a company (in this case, Warner Bros) without the consent of the company’s board of directors. Instead, the offer goes straight to shareholders for their consideration.
New offer
Paramount’s offer is all cash (no equity) and is $US18 billion more than Netflix’s. U.S. President Donald Trump’s son-in-law Jared Kushner is one of the investors behind the deal.
The Paramount offer also includes buying CNN, while Netflix’s offer excludes CNN.
In a statement, Paramount said: “Paramount’s strategically and financially compelling offer to [Warner Bros.] shareholders provides a superior alternative to the Netflix transaction.”
What now?
Warner Bros and Netflix have not responded to Paramount’s proposal.
Trump has weighed in, saying Netflix’s plan “could be a problem,” due to how much of the market a combined company would control.
Any deal, whether it’s with Netflix or Paramount, will need to be approved by the Federal Communications Commission, which will evaluate it against “anti-trust” laws. These laws are intended to prevent companies from creating monopolies, maintaining competition and reducing prices for consumers.
