Warner Bros Discovery Inc.’s Chairman, Samuel DiPiazza, has expressed strong support for the company’s merger agreement with Netflix Inc., dismissing a competing bid from Paramount Skydance Corp. that is backed by tech billionaire Larry Ellison. In an appearance on CNBC’s “Squawk Box” on March 13, 2024, DiPiazza emphasized the advantages of the Netflix deal, highlighting a signed agreement and affirming its “compelling value” for shareholders.
DiPiazza noted that Warner Bros remains committed to Netflix due to the legal agreement in place, stating, “We have a signed merger agreement with Netflix.” He elaborated that the deal not only offers a clear path to completion but also includes significant protections for shareholders. “If something stops the close, whatever that might be, we have safeguards in place,” he added.
While acknowledging Ellison’s involvement, DiPiazza maintained that the Paramount offer lacks key features, insisting, “Ultimately, he didn’t raise the price.” He reiterated that from the management’s perspective, “Netflix continues to be the superior offer,” signifying a clear preference for the streaming giant over its rival.
Regulatory Challenges Ahead
Despite the strong backing for the Netflix agreement, it is not without its challenges. DiPiazza recognized that regulatory hurdles, particularly in Europe, could complicate the merger process. Critics, including Matt Stoller of the American Economic Liberties Project, have voiced concerns that the merger could negatively impact the theatrical marketplace. Stoller described the deal as a potential “disaster for America,” emphasizing the concentration of market power it could create.
The merger has also drawn bipartisan scrutiny from U.S. lawmakers and Hollywood unions. Notably, former President Donald Trump has stated his intention to take a more active role in reviewing the agreement, indicating that the combined entities would command a “very big market share,” which he believes could present problems.
DiPiazza remains optimistic, arguing, “We continue to believe that both of these deals have a path to be approved.” He also pointed to the financial risks associated with a leveraged buyout structure like that proposed by Skydance, suggesting that the entire sector is under stress. “The entire sector is under stress,” he said, indicating potential difficulties with debt refinancing and changing market conditions in the near future.
He highlighted the strength of the Netflix deal further by referencing its substantial break fee of $5.8 billion, which would be paid to Warner Bros if the merger does not complete for any reason. “We’ve got a signed deal with an investment-grade $400 billion company,” DiPiazza stated, reinforcing the confidence in the agreement’s viability.
Market Reaction
Following DiPiazza’s statements, Warner Bros Discovery shares experienced a slight increase of 0.30% on March 13, closing at $28.56. However, the stock saw a decline of 0.73% in after-hours trading. Analysts have noted that Warner Bros Discovery is performing well according to Benzinga’s Edge Stock Rankings, with a favorable price trend in the short, medium, and long terms.
As the situation develops, the industry will be watching closely to see how these negotiations unfold and the impact they may have on the broader media landscape. The stakes are high, with millions of dollars, the future of prominent companies, and significant regulatory scrutiny all in play.
