Paramount Skydance Corporation - CL B

$Netflix(NFLX.US) gained +6% today. Investors are now betting that that it loses $Warner Bros. Discovery(WBD.US) to $Paramount Skydance Corporation - CL B(PSKY.US).

$Warner Bros. Discovery(WBD.US) (+4.4% to $29.50/share) likely to move higher as $Paramount Skydance Corporation - CL B(PSKY.US) raises its bid above the $30/share cash offer previously submitted. $Netflix(NFLX.US) offer of $27.75/share ($23.25/share cash + $4.50/share stock) was deemed by $Warner Bros. Discovery(WBD.US) Board as superior because it excludes the global network business to be spun off, which NFLX estimates is worth $3/share. PSKY’s $30/share cash bid is for the entire company, including the global network business. NFLX’s offer faces regulatory hurdles given high industry concentration (~36%) of the combined NFLX / Paramount streaming business.

As expected, Paramount has launched a hostile $30/share cash offer for all of $Warner Bros. Discovery(WBD.US), which would have far fewer regulatory issues than the $Netflix(NFLX.US) offer of $27.75/share ($23.25/share cash plus $4.50/share NFLX stock). Specifically, the $Paramount Skydance Corporation - CL B(PSKY.US) offer which is backed by the Ellison family, offers $18 billion more in cash than the NFLX offer, and would likely close much quicker than the NFLX offer. Importantly, the $Paramount Skydance Corporation - CL B(PSKY.US) offer is for all of WBD, including the global networks being spun off, while the NFLX offer imputes $3/share of value to spinoff of the WBD global networks business. We expect this to cause the NFLX offer for $Warner Bros. Discovery(WBD.US) to go even higher.