Exclusive: Netflix has ample room to increase its offer in battle for Warner Bros, sources say | ReutersSkip to main content[Exclusive news, data and analytics for financial market professionalsLearn more aboutRefinitiv]A drone view shows the Netflix logo on one of the company's buildings in the Hollywood neighborhood in Los Angeles, California, U.S., January 20, 2026. REUTERS/Daniel Cole/File Photo [Purchase Licensing Rights, opens new tab]Feb 19 (Reuters) - Netflix [(NFLX.O), opens new tab] has ample cash ...

Warner Bros Discovery (WBD) has reopened talks with Paramount Skydance, giving the company seven days to table its best and final offer and top an existing agreement with Netflix.WBD has so far stuck to its binding agreement with Netflix and rejected a series of sweetened offers from Paramount, resulting in the company pursuing a hostile $108.4bn (£76.8bn) takeover directly with shareholdersLast week, WBD said that a senior representative for Paramount had informally told a board member that it would raise ...

Core Viewpoint - Warner Bros Discovery is contemplating reopening sale discussions with Paramount Skydance following an amended offer from Paramount, which may present a more favorable deal compared to the current agreement with Netflix [1][4]. Group 1: Offer Details - Paramount has enhanced its bid for Warner Bros by proposing a 25-cent-per-share quarterly "ticking fee," amounting to approximately $650 million, starting in 2027 until the deal closes [5]. - Paramount has also agreed to cover Warner Bros' $2.8 billion breakup fee to Netflix if Warner Bros decides to withdraw from the Netflix deal [5][7]. - Despite these enhancements, Paramount has not increased its initial offer of $30 per share, which values the deal at $108.4 billion, including debt [5]. Group 2: Strategic Interests - Both Netflix and Paramount are interested in acquiring Warner Bros due to its prominent film and television studios, extensive content library, and major franchises such as "Game of Thrones," "Harry Potter," and DC Comics superheroes [6]. - Activist investor Ancora Holdings, holding a stake of nearly $200 million, has expressed intentions to oppose the Netflix deal, claiming that Warner Bros' board did not adequately engage with Paramount regarding its competing bid [6].

Core Viewpoint - Activist investor Ancora Holdings has acquired a stake in Warner Bros Discovery and intends to oppose the company's deal with Netflix, citing inadequate engagement with Paramount Skydance regarding a rival offer for the entire company [1][2]. Group 1: Stake and Opposition - Ancora Holdings has built a stake in Warner Bros worth nearly $200 million, representing less than 1% of the company's outstanding shares [4]. - The investor plans to vote against the Netflix deal at an upcoming shareholder meeting unless Warner Bros reverses its recommendation in favor of the acquisition [2]. Group 2: Value Comparison - Ancora argues that the proposed Netflix-Warner Bros deal offers inferior value and carries significant regulatory risks, while a competing offer from Paramount provides a clearer path to approval and a higher value of $30 per share [3][6]. - Paramount's bid, valued at $108.4 billion including debt, has not been increased, but it offers additional cash incentives to Warner Bros investors for delays in closing the deal [5][6]. Group 3: Strategic Moves - Paramount has extended its tender offer deadline to February 20 to persuade investors and has committed to covering the $2.8 billion breakup fee if Warner Bros withdraws from the Netflix deal [5][7]. - Analysts suggest that Paramount may need to raise its offer to reignite deal discussions, but Ancora believes the improved offer qualifies as a superior proposal under the Netflix agreement [7].

Core Viewpoint - The acquisition of Warner Bros. by Netflix marks a significant shift in the streaming industry, potentially disrupting Hollywood and consolidating major franchises under one platform [2][3]. Group 1: Acquisition Details - Netflix has acquired Warner Bros.' film and television studios, HBO, HBO Max, and other assets, bringing together iconic franchises like Game of Thrones and Harry Potter [2]. - The deal is valued at approximately $82.7 billion, with Netflix offering $27.75 per WBD share in an all-cash agreement [9][10]. - Paramount had initially offered around $108 billion to acquire the entire company, but Netflix's focused offer on specific assets was deemed more attractive by WBD's board [8]. Group 2: Competitive Bidding Process - The bidding process for WBD became competitive, with Paramount and Comcast emerging as serious contenders, but Netflix ultimately secured the deal [6][8]. - Paramount's proposal was rejected due to concerns about its heavy debt load, which would have left the combined company with $87 billion in debt [12]. - Paramount has continued to pursue WBD's assets, even filing a lawsuit for more information about the Netflix deal [13]. Group 3: Regulatory Scrutiny - The deal faces intense regulatory scrutiny, with Netflix co-CEO Ted Sarandos scheduled to testify before a U.S. Senate committee [15]. - Prominent lawmakers have expressed concerns that the merger could lead to excessive market power, potentially harming consumers and stifling competition [16]. - If regulators block the acquisition, Netflix would be liable for a $5.8 billion breakup fee [17]. Group 4: Industry Reactions - The entertainment industry has largely reacted negatively, with the Writers Guild of America calling for the merger to be blocked on antitrust grounds [19]. - Concerns have been raised about the potential impact on independent creators and job losses within the industry [19]. - Netflix has indicated that operations at HBO will remain largely unchanged in the near term, with no immediate pricing changes expected during the regulatory approval period [21][22]. Group 5: Timeline for Closure - The deal is not yet finalized, with a WBD stockholder vote expected around April, and the acquisition anticipated to close 12 to 18 months after that vote, pending regulatory approvals [23].

Group 1 - Paramount Skydance has increased its bid for Warner Bros Discovery to $30 per share, offering additional cash for delays and agreeing to cover the breakup fee owed to Netflix if the deal fails [1][2] - The "ticking fee" of 25 cents per share will amount to approximately $650 million in cash for each quarter from January 1, 2027, until the deal is finalized [1] - Paramount will also cover the $2.8 billion termination fee that Warner Bros Discovery would owe Netflix if the acquisition does not proceed [2] Group 2 - Paramount is actively campaigning to persuade shareholders that its bid is more favorable, despite Warner Bros Discovery rejecting the offer [3] - Warner Bros Discovery plans to hold a special investor meeting to vote on the Netflix deal, which is expected to occur by April [3]

Core Viewpoint - The Justice Department is investigating Netflix for potential anticompetitive practices related to its proposed acquisition of Warner Bros. Discovery, which may indicate broader scrutiny of Netflix's business model [1][9]. Group 1: Investigation Details - The DOJ has issued a civil subpoena to another unnamed entertainment firm, seeking information on any exclusionary conduct by Netflix that could entrench its market power [2]. - The investigation may provide the DOJ with a legal basis to challenge the Warner Bros. deal if evidence of monopolistic behavior is found, although the investigation is expected to take a considerable amount of time [5][6]. Group 2: Proposed Deals - Netflix has agreed to acquire Warner Bros. Discovery's studio and streaming business for $72 billion, paying $27.75 per share, which could create a significant player in the entertainment industry [3]. - Paramount has made a $77.9 billion hostile bid for the entire Warner Bros. Discovery company, arguing that its offer provides better value compared to Netflix's proposal [3][4]. Group 3: Market Impact - Concerns regarding the investigation have negatively impacted Netflix's stock price, which has decreased by over $160 billion in market value in the past six months [10]. - If the merger between Netflix and Warner Bros. Discovery proceeds, the combined entity would control approximately 30% of the U.S. subscription service market, raising antitrust concerns [11]. Group 4: Company Responses - Netflix's legal representatives assert that the DOJ is conducting a standard review of the merger proposal and have not indicated any separate monopolization investigation [6][8]. - A Netflix spokesperson stated that the company is engaging constructively with the DOJ as part of the standard review process for the acquisition [8].

Core Insights - Netflix reported solid earnings with Q4 revenue exceeding $12 billion, an 18% increase year-over-year, and earnings per share of $0.56, slightly above Wall Street projections. However, the stock dropped due to management's forecast of slower revenue growth for 2026, projecting a growth rate of 12-14% compared to 16% in 2025 [2][3][10] Financial Performance - Q4 revenue was over $12 billion, up 18% from the previous year [2] - Earnings per share stood at $0.56, slightly above expectations [2] - The company reached approximately 325 million global paid memberships, adding 23 million subscribers in 2025 [2][3] Growth Outlook - Management anticipates a revenue growth rate of 12-14% for 2026, a decrease from 16% in 2025 [2][7] - The ad business is growing significantly, with ad sales expected to double in 2026 from $1.5 billion in 2025 [6][7] - The company is transitioning into a more mature phase, focusing on sustaining its business rather than hypergrowth [3][4] Strategic Moves - Netflix amended its bid for Warner Brothers Discovery to an all-cash offer of $27.75 per share, valuing the deal at approximately $72 billion, or $83 billion including debt [9][10] - The acquisition aims to secure a vast content library, enhancing Netflix's competitive position in the streaming market [10][15] - The all-cash structure is designed to provide immediate value to Warner Brothers shareholders and reduce stock price volatility [10] Debt and Financing - Netflix's debt is projected to increase from $34 billion to $42 billion to finance the acquisition, raising concerns about financial flexibility [10][11] - The company had $15.8 billion in debt at the end of 2020, which has been decreasing as it used debt to acquire content [11] - Management believes they can handle the increased debt and maintain cash flow, indicating confidence in long-term financial stability [11][12] Market Position - Netflix is recognized as the leader in streaming, but faces increased competition from platforms like YouTube, which is gaining market share [4][6] - The company is adapting to a more mature business model, focusing on content acquisition and strategic investments rather than rapid growth [3][4] - The acquisition of Warner Brothers Discovery is seen as a critical move to bolster Netflix's content offerings and market power [15]

Core Viewpoint - Paramount Skydance aims to save $6 billion through job cuts and operational efficiencies if it successfully acquires Warner Bros. Discovery, amidst concerns of job losses in Hollywood due to industry downsizing [1][2]. Group 1: Acquisition Plans - Paramount is pursuing a $108.4 billion deal to acquire Warner Bros. Discovery, which includes major assets like HBO, HBO Max, and CNN [4]. - Warner's board currently favors Netflix's $82.7 billion offer and has rejected Paramount's proposals, leading to a more aggressive approach from Paramount to appeal directly to Warner's investors [5]. Group 2: Cost-Saving Strategies - The combined company plans to identify savings by eliminating duplicative operations across various business functions, including finance, legal, and technology [3]. - Paramount has previously indicated a target of $6 billion in synergies from the merger, although it would reduce program spending by about 10% if the acquisition is successful [6]. Group 3: Production Goals - David Ellison aims to increase the combined output of Paramount and Warner Bros. to over 30 films annually, with Paramount looking to nearly double its own output to 15 films [7][8]. - Warner Bros. plans to release 17 films this year, and the combined studio's total would reach 32 films if Paramount's goals are met [8]. Group 4: Industry Impact - Paramount emphasizes that the merger would strengthen Hollywood rather than weaken it, aiming to support the creative industry and enhance competition [6][9].

Core Viewpoint - Netflix co-CEO Greg Peters criticized Paramount Skydance's $108 billion hostile bid for Warner Bros. Discovery, deeming it unrealistic without financial backing from Oracle's Larry Ellison [1][2]. Group 1: Bid Analysis - Paramount's proposal is heavily reliant on debt and external support, making it riskier compared to Netflix's all-cash offer of $82.7 billion for Warner Bros.' film and television studios [3]. - Peters described the additional leverage required for Paramount's bid as "pretty crazy" [4]. Group 2: Shareholder Support - Paramount has approached Warner Bros. Discovery shareholders directly after the board rejected its bid, but has only secured about 7% of shares, which is insufficient for control [4]. Group 3: Industry Impact - A potential merger between Netflix and Warner Bros. would significantly alter Hollywood, combining major franchises like "Game of Thrones" and "Harry Potter" with Netflix's popular series [5]. - Concerns have been raised among filmmakers, unions, and theater owners regarding Netflix's influence on theatrical releases [5]. Group 4: Regulatory Considerations - Netflix has committed to honoring Warner Bros.' typical 45-day theatrical window, addressing concerns about undermining cinemas [6]. - Regulatory scrutiny from U.S. and European authorities is anticipated for both Netflix's and Paramount's bids [6]. Group 5: Competitive Landscape - Peters emphasized that Netflix competes with a wide array of players, including YouTube, Amazon, and Apple, noting that Netflix accounts for less than 10% of TV viewing hours in most markets [7].