Warner Bros-Netflix Deal: Activist Reportedly Builds $200M Stake In WBD, Nudges It To Review Paramount’s Bid Thoroughly

According to a Wall Street Journal report, Ancora Holdings has signaled that it may also pursue a proxy fight.

• Ancora believes Warner Bros. did not adequately engage with Paramount Skydance regarding the latter’s acquisition offer.
• The development adds a new angle to the WBD-Netflix deal, which has been dragging on due to Paramount's pursuit and a regulatory review.
• Stocktwits sentiment for Netflix and Paramount is ‘bearish.’

In a new development that could affect the Warner Bros. Discovery deal, activist investor Ancora Holdings has built a roughly $200 million stake in the media conglomerate and is planning to nudge it toward Paramount Skydance’s acquisition offer.

The move was reported by The Wall Street Journal on Tuesday, citing unnamed sources, which added that Ancora could announce its position as early as Wednesday.

A roughly $11 billion fund, Ancora believes Warner Bros. failed to adequately engage with Paramount Skydance, which is offering $30 per share, or $108.4 billion in total, for the entire company. It reportedly emailed Warner CEO David Zaslav to say that it was considering launching a proxy fight if Warner’s board doesn’t negotiate the best deal for shareholders with Paramount.

Paramount’s WBD Pursuit

Meanwhile, Paramount is going all guns blazing to acquire Warner Bros., which, in December, agreed to sell most of its assets to Netflix for $27.75 per share, or $72 billion.

Paramount, led by David Ellison, son of Oracle founder Larry Ellison, sweetened its all-cash offer on Monday, offering WBD shareholders extra cash for each quarter the deal fails to close after this year and agreeing to cover the breakup fee the HBO owner would owe Netflix if it walked away. 

WBD-Netflix Deal Hurdles

Both Netflix and Paramount desire Warner Bros. for its top-tier film and TV studios, deep content library, and blockbuster franchises, including “Game of Thrones,” “Harry Potter,” and DC superheroes such as Batman and Superman.

The deal has grown increasingly complex and protracted amid Paramount’s aggressive pursuit, even as an ongoing antitrust review hangs in the balance. Last week, Netflix co-CEO Ted Sarandos appeared before a Senate committee to argue that the transaction would not limit consumer choice and, instead, would serve as a boost for Hollywood.

Pressure On Netflix, Paramount

The deal has become a drag on the potential acquirers' stocks. Netflix shares and Paramount shares have declined 25.3% and 27%, respectively, in the past three months. WBD stock, meanwhile, has surged over 23% in the same period.

On Stocktwits, retail sentiment for NFLX and PSKY has oscillated widely in this period, and was ‘bearish’ as of the last reading. 

Investors are more worried about Netflix. Projections of rising costs and shrinking margins, outlined in the company's earnings report on Jan. 20, have contributed to its stock price decline.

“$NFLX just let the deal go, not worth it to acquire Warner,” a user posted on Stocktwits. “Take the $2.8 billion termination fee from Paramount, make shareholders happy again.” 

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