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Future Warner Bros. Discovery The company — its popular studio, HBO Max, and its cable networks, including CNN, TBS, TNT, Discovery and HGTV — may be on the minds of European regulators. Netflix.
It’s a pretty crazy twist for a deal that would determine the future of a lot of valuable American sports rights — assets that are largely limited to Europe.
Quick Update: WBD owns many live US sports rights including March Madness, Major League Baseball, National Hockey League, NASCAR, French Open, AEW, College Football Playoffs and more. But these rights are not transferred to Netflix WBD negotiated deal selling some of its assets to the streaming giant.
Netflix agreed to pay $27.75 a share for WBD’s movie studio and streaming business, but not the cable networks that own sports rights. If the deal is approved, the networks will become a separate publicly traded entity called Discovery Global, which will own Bleacher Report, Highlights House and WBD’s other digital assets.
If WBD shareholders a an act of conquest from Paramount Skydancehowever – and if the deal is approved – all of the cable networks and associated sports will fall under the Paramount umbrella. Paramount made an offer of $30 per share for the full value of WBD – an offer that was accepted directly by shareholders after being rejected by WBD’s board.
Thursday is the most important day extended the deadline will give WBD shareholders more time to weigh the option on its tender offer, which expired on Wednesday.
WBD responded with a statement, noting that less than 7% of all shareholders had purchased their shares in Paramount so far.
“As Paramount continues to make the same proposal, our board has repeatedly and unanimously rejected a superior merger agreement with Netflix. And our shareholders agree, with more than 93% rejecting Paramount’s inferior plan,” WBD said. “We are confident that we will be able to obtain regulatory approval for the Netflix merger, and Warner Bros. We look forward to the substantial and tangible value our agreement will deliver to Discovery shareholders.”
Most of the media focused on what US President Donald Trump is doing can think about Netflix-WBD deal. Netflix CEO Ted Sarandos met with Trump before the deal to get his take on the transaction. The U.S. Department of Justice — an agency that is theoretically independent from the presidency — decides whether the deal raises antitrust problems and whether those problems can be ameliorated by terms or are too big to deal with.
Much less attention has been paid to Europe, which must also approve the deal. This is where both deals can be broken.
Netflix is a global company that generated about $14.5 billion in revenue last year in its EMEA (Europe, Middle East and Africa) region, or about 32% of total sales.
WBD is confident the Netflix deal will win EU approval, according to people familiar with the matter. WBD’s source said there was a “95% certainty” that Europe would approve the transaction, although the person acknowledged that Netflix may need to agree to certain conditions, such as agreeing to produce a certain amount of local content in Europe and promising to release films in theaters. of the EU Audiovisual Media Services Directive already, video-on-demand streaming services ensure that at least 30% of programming in EU countries qualifies as European works.
Paramount disagrees and believes the Netflix deal has little chance of making it through European regulators, according to people familiar with the matter. At the same time, it is working out its own regulatory angles to bring its own EU under control.
It would be unusual but unprecedented for European regulators to block a deal between two U.S.-based companies. Amazon left The $20 billion acquisition of cloud software company Figma in December 2023 after the UK’s Competition and Markets Authority ruled there was “no clear path” to antitrust approval in Europe and the UK. also forced Meta Facebook will sell Giphy, the largest provider of animated gifs to social networks, in 2022.
It should be noted that the European Commission has approved Amazon’s acquisition of MGM, which is the closest comparison to this deal in terms of comparable businesses.
Paramount’s confidence stems from the continent’s track record of being tough on tech companies with antitrust and punitive measures. targeting meta, Microsoft, google, Apple and Amazon in recent years. Paramount executives believe EU regulators will take a similar view of Netflix, based on recent conversations with European officials, according to people familiar with the matter. Given the potential to stop Big Tech from gaining even more market power, Paramount executives believe Europe will embrace it.
The EU may also be apathetic in its treatment of cinema owners, who regard them as important for culture and the arts. Both the US and European motion picture industry trade associations exist expressed in public their protest Through the Netflix-Warner combination.
This week, Sarandos told Warner Bros. reiterated that the films will be released in cinemas with a window of 45 days as usual.
“We are working closely with WBD and regulatory authorities, including the US Department of Justice and the European Commission. We are confident that we will be able to secure all approvals,” Sarandos said on Tuesday. Netflix earnings conference call. “When this transaction closes, we will have a large, world-class theatrical distribution business with global box office revenue of over $4 billion. We are excited to retain and further strengthen this business.”
The WBD board viewed the merger of the two movie studios — Paramount and Warner — as a bigger regulatory hurdle than any proposed by Netflix, according to people familiar with the matter. However, WBD lawyers indicated that both deals — Netflix-WBD and Paramount-WBD — could receive approval.
“The WBD board carefully considered the federal, state and international regulatory risks for both the Netflix merger and the (Paramount tender) proposal with its regulatory advisors,” WBD said in a December corporate filing. “The WBD Board believes that each transaction is capable of obtaining the necessary approvals from U.S. and foreign regulatory authorities and that any difference between the respective levels of regulatory risk is immaterial.”
On the theater issue, a Warner source told me that WBD actually sees Paramount as a potentially bigger deal than Netflix. That’s because WBD’s board and executives aren’t sure Paramount can afford to make 30 or more movies a year (Paramount CEO David Ellison promise) while paying down billions of dollars in debt and targeting $6 billion in cost savings.
That’s why the structure of the Paramount deal is so important to WBD. To make a better deal for WBD, David’s father and one of the world’s richest men, Larry Ellison, would have had to invest more in equity to reduce the combined company’s leverage ratio. Management does not believe that Paramount will be able to achieve its aggressive theatrical targets, moving forward with a leverage ratio of 7x 2026 EBITDA and sustaining its synergies.
This week, Netflix changed its offer for WBD’s assets to mostly cash all cash. Streamlining the bid would allow WBD to move a shareholder meeting to approve Netflix’s offer earlier — as early as March, according to a person familiar with the matter.
Paramount is still considering whether it wants to raise its offer or change its capital structure to re-engage WBD’s board, people familiar with the matter said. Nor can it do anything and wait to see if regulators — European or American — are right to block the Netflix deal.
With so much focus on the importance of live sports to the television industry, it’s unusual to see them as such an afterthought. Paramount executives believe Discovery Global should be worth $0, based on its high leverage ratio and an early valuation by CNBC parent Versant, which has fallen nearly 30% since debuting on the public markets this month.
a corporate documentation In a WBD release on Tuesday, Discovery Global should be valued at between $1.33 and $6.86 per share, depending on estimates.