Latest / Bloomberg Intelligence / Netflix Amends Warner Bros. Deal to All Cash in Bidding War

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Netflix Amends Warner Bros. Deal to All Cash in Bidding War · Bloomberg Intelligence

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  Speaker 2: Well.
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  Speaker 3: Netflix back in the news today.
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  Speaker 4: They're amending their offer for Warner Brothers Discovery to an
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  Speaker 4: all cash deal. Was cash and stock, now going all cash,
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  Speaker 4: believing that will strengthen their bid.
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  Speaker 3: They've also got earnings there for the closer.
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  Speaker 4: So a lot to talk about on the Netflix front,
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  Speaker 4: which means we want to check in with Eitha.
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  Speaker 3: Wrong or nothing.
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  Speaker 4: She covers all the media stocks for Bloomberg Intelligence. She's
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  Speaker 4: based down in Princeton here. So Keitha, what did you
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  Speaker 4: make of Netflix today kind of amending their offer to
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  Speaker 4: an all cash offer.
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  Speaker 2: Yeah, so this really Paul puts to rest this ongoing
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  Speaker 2: investor debate about whether you know the paramount thirty dollars
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  Speaker 2: all cash bid for all of Warner is really in
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  Speaker 2: fact superior to Netflix's bid, which was a which is
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  Speaker 2: a combination of both stock and cash, especially since the
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  Speaker 2: value of Netflix's stock has been declining now for many months.
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  Speaker 2: So I think what Netflix really aims to do here
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  Speaker 2: is to first of all, just show David Zaslab and
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  Speaker 2: Warner Brothers Discovery shareholders the money. So they're going all cash,
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  Speaker 2: you know, and they're basically saying that we want to
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  Speaker 2: really get this deal on a fast track here because
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  Speaker 2: this will speed up the shareholder vote. It will now
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  Speaker 2: happen sometime in April. It was previously supposed to happen
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  Speaker 2: sometime in June. So they're really kind of getting going here,
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  Speaker 2: and you know, put the putting the money where their
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  Speaker 2: mouth is, you know.
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  Speaker 4: You know, first thing, when I saw this news this morning, KEITHA,
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  Speaker 4: I put my own banker hat back on. I said, boys,
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  Speaker 4: seems like Netflix is bidding against the self because we
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  Speaker 4: haven't heard any kind of counterbid from Paramount here. What
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  Speaker 4: do you think is going on behind the scenes with
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  Speaker 4: both of these bidders.
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  Speaker 2: Yes, so you know, Paramount obviously they've been constantly insisting,
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  Speaker 2: you know, about the superiority of that thirty dollars all
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  Speaker 2: cash offer. With Netflix having changed its bid to an
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  Speaker 2: all cash bid, I think the ball is now squarely
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  Speaker 2: in Paramount score. They have to have to increase or
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  Speaker 2: sweeten their bid. You know, one of the things, Paul,
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  Speaker 2: that has been constantly debated is the value of the
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  Speaker 2: TV networks, that is, the remaining portion of the business
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  Speaker 2: that Netflix will not acquire, so this will be spun
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  Speaker 2: off by Warner Brothers. Discovery Paramount has argued that those
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  Speaker 2: TV networks are actually worth nothing. That's what they've said,
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  Speaker 2: And they've based our argument just you know, kind of
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  Speaker 2: on the performance and the valuation of Worsen, which is
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  Speaker 2: the Comcast cable network spin off. But Discovery actually put
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  Speaker 2: out a filing today and it basically suggests that, of
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  Speaker 2: course there's a huge range for those cable TV networks,
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  Speaker 2: but they value them anywhere from about a dollar fifty
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  Speaker 2: a share to as high as seven dollar dollars a share,
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  Speaker 2: and they kind of lay out many different scenarios basically
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  Speaker 2: suggesting that, you know, some of those networks, like a CNN,
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  Speaker 2: like some networks international networks in Poland could actually be
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  Speaker 2: sold and you know, a lot more shareholder value could.
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  Speaker 4: Be extracted, so to speak.
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  Speaker 3: So I think Warner Brothers still.
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  Speaker 2: Believes that the spin off of the cable networks will
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  Speaker 2: actually bring it more value. And this is why they're
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  Speaker 2: kind of leaning towards that Netflix offer.
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  Speaker 4: What's the timing here, do we wait until the shareholder
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  Speaker 4: vote until April or do we expect something happening. Seems
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  Speaker 4: to be dragging on here a little bit.
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  Speaker 2: Yeah, it is. So Actually tomorrow is a very important day.
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  Speaker 2: And I say that because tomorrow is the deadline for
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  Speaker 2: the Paramount tender, which is the thirty dollars tender. So
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  Speaker 2: expect something to happen. Either Paramount extends that offer or
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  Speaker 2: they basically have to sweeten the bit. So so something
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  Speaker 2: definitely should have happened tomorrow. If nothing happens, then we'll
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  Speaker 2: have to wait and watch and see, you know, what
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  Speaker 2: happens now On the regulatory front, because now that we
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  Speaker 2: have all the financial terms in place, I think the
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  Speaker 2: next big question mark is obviously what are the regulators
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  Speaker 2: going to say about this.
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  Speaker 3: Deal and what's the early thinking there.
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  Speaker 2: So it's a little bit of a mixed bag here,
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  Speaker 2: and it's going to be really interesting to see what
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  Speaker 2: Netflix actually does. So they've kind of laid out many
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  Speaker 2: different arguments which should, I think, kind of soothe regulator fears,
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  Speaker 2: kind of not have too much of regulatory scrutiny. So
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  Speaker 2: they've said that they're going to maintain the HBO business,
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  Speaker 2: they're going to maintain the theatrical business. These were all
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  Speaker 2: big question marks when they initially announced the deal. One
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  Speaker 2: of the big things that we are kind of looking
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  Speaker 2: for tonight when Netflix reports earnings is what their stance
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  Speaker 2: is going to be on price increases. So the last
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  Speaker 2: time that they raised prices in the US was last January,
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  Speaker 2: so exactly twelve months ago, and typically they have the
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  Speaker 2: s cadence of increasing prices every twelve to eighteen months.
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  Speaker 2: So it's going to be interesting to see whether they
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  Speaker 2: are going to take that chance and go ahead and
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  Speaker 2: raise prices or in fact stay away from raising prices.
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  Speaker 2: That's making the case regulators that you know they're more
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  Speaker 2: pro consumer, and you know they're they're kind of especially
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  Speaker 2: when you know the deal is kind of in regulatory
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  Speaker 2: cross hairs. So a lot of things here still kind
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  Speaker 2: of waiting to unfold, Paul, But it's it's going to
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  Speaker 2: be a very different process here in the US where
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  Speaker 2: it seems like that regulators might give Netflix a green signal.
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  Speaker 2: But I think it's going to be much tougher for
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  Speaker 2: them in the EU, where where they do have much
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  Speaker 2: higher anti trust issues.
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  Speaker 4: Thirty seconds left here, geth the company Netflix is reporting
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  Speaker 4: after the close here Aside from this deal flow, what
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  Speaker 4: else are you looking for?
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  Speaker 2: I think the number one thing that everybody is going
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  Speaker 2: to look for is revenue guidance for twenty twenty six.
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  Speaker 2: I mean, one of the things that the deal, the
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  Speaker 2: concern that it raises is revenue growth going to slow?
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  Speaker 2: Is revenue growth slowing? Is that why they bought Warner?
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  Speaker 5: And so?
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  Speaker 2: Anything below thirteen percent? Thirteen percent is the consensus number
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  Speaker 2: right now. Anything below thirteen percent not good for Netflix?
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  Speaker 3: Say with us. More from Bloomberg Intelligence coming up after this.
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• 6:13
  Speaker 5: Well, the President is on a mission. He is determined
• 6:16
  Speaker 5: to gain control of Greenland, and he has made that
• 6:18
  Speaker 5: his central issue as he makes his way to Davos
• 6:22
  Speaker 5: tomorrow to speak with global leaders. In doing so, he's
• 6:25
  Speaker 5: breaking all kinds of diplomatic norms, sharing friend Emanuel Maccon's
• 6:29
  Speaker 5: personal text to him and essentially mocking him. So new
• 6:34
  Speaker 5: things are happening every day. Let's bring in Henrietta Trace.
• 6:36
  Speaker 5: She is managing partner and director of Economic Policy at
• 6:39
  Speaker 5: Veda Partners. Henrietta help us make sense of what is
• 6:43
  Speaker 5: happening here when it comes to Greenland and the President
• 6:47
  Speaker 5: threatening perhaps the EU trade deal that was struck last year,
• 6:53
  Speaker 5: threatening to impose more tariffs even as we await a
• 6:55
  Speaker 5: Supreme Court ruling on the legality of those terrffts.
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  Speaker 6: I think you just nailed two of the three reasons
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  Speaker 6: we are talking about Greenland. The first one is that
• 7:05
  Speaker 6: the USU trade deal, as far as I can tell,
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  Speaker 6: is dead. The EU was planning to drop its industrial
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  Speaker 6: tariffs on US exports to zero percent later on this week.
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  Speaker 6: That's off the table. I think the agreement and the
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  Speaker 6: lower fifteen percent tariffs that were reached last year are
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  Speaker 6: probably going to revert back to probably going to revert
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  Speaker 6: back to the twenty percent Liberation Day tariffs. So I
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  Speaker 6: think that's an acknowledgment that there's no deal on digital
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  Speaker 6: services taxation, there's no deal on agriculture issues that have
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  Speaker 6: plagued the two sides for one hundred years. There are
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  Speaker 6: a lot of issues with the USU trade deal that
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  Speaker 6: just are not going to be resolved, and this is
• 7:42
  Speaker 6: the President's way of sort of circumventing that. And then finally,
• 7:46
  Speaker 6: as we all await the Supreme Court, it strikes me
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  Speaker 6: as plainly obvious that when and if they do strike
• 7:52
  Speaker 6: down the President's i EPA tariff authority, and the Republican
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  Speaker 6: Party and President Trump specifically are materially underwater on their
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  Speaker 6: hands of inflation prices and the economy with the American
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  Speaker 6: voter base, they don't have the ability to keep ratcheting
• 8:07
  Speaker 6: up tariffs through other alternatives. So Greenland is actually an
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  Speaker 6: excellent replacement for tariffs because it keeps those EU and
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  Speaker 6: UK and other NATO allies incredibly focused on the US
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  Speaker 6: willing to cater to the President's needs and wants, and
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  Speaker 6: they don't have to necessarily hit back with tariffs which
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  Speaker 6: the domestic audience in the United States cannot stomach anymore.
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  Speaker 6: And those are the biggest reasons I think we're talking
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  Speaker 6: about Greenland right.
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  Speaker 3: Now, Henrietta.
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  Speaker 4: How's it playing within the Republican Party these days or
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  Speaker 4: just within Washington. This whole focus on Greenland, it seemed
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  Speaker 4: to come out of nowhere and the presence not letting
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  Speaker 4: it go. Are there political ramifications? This is an election here.
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  Speaker 6: You know, I've watched polling data, and I've worked on
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  Speaker 6: elections from Texas to Rhode Island for twenty years now.
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  Speaker 6: I have never seen the American public so unified in
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  Speaker 6: opposition to a single item. I don't think this many
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  Speaker 6: Americans like ice cream or disney World. You know, it's
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  Speaker 6: something like eighty two eighty three percent of Americans oppose
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  Speaker 6: this Greenland move. That's a striking amount of unanimity and
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  Speaker 6: a pretty clear message to the president.
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  Speaker 3: What does he do with that? Though? What does Congress
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  Speaker 3: do with that?
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  Speaker 5: What does the Republican Party do with that unified opposition
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  Speaker 5: to Greenland? To the US taking control of Greenland?
• 9:22
  Speaker 1: Well?
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  Speaker 6: I think it really Yeah, I think it really speaks
• 9:26
  Speaker 6: to the next phase of President Trump's political status in
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  Speaker 6: the United States, which is that we're moving into lame
• 9:32
  Speaker 6: duck territory. I think we're already there. So what that
• 9:35
  Speaker 6: means is you're not going to get out of Congress
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  Speaker 6: this year that will advance the president's agenda. That's not abnormal.
• 9:41
  Speaker 6: Very few presidents pass two reconciliation bills Joe Biden was
• 9:45
  Speaker 6: definitely an outlier in that regard, and you got two
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  Speaker 6: bipartisan bills done. I don't think that's an option for
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  Speaker 6: this president, you know, in this sort of scorched earth environment.
• 9:54
  Speaker 6: So what presidents do in that scenario is they pivot
• 9:56
  Speaker 6: to foreign policy. And that's what the president has been
• 9:59
  Speaker 6: focused on for many months now, whether it is you know, Israel,
• 10:02
  Speaker 6: Gaza or Venezuela and now Greenland. And that's where lame
• 10:06
  Speaker 6: duck presidents traditionally head to at the end of their terms.
• 10:10
  Speaker 6: So I know we have three years left of President Trump,
• 10:12
  Speaker 6: but the legislative realities, particularly as we look forward to
• 10:16
  Speaker 6: a midterm election cycle where Democrats are leading in the
• 10:19
  Speaker 6: generic ballot, which is highly predictive of election outcomes by
• 10:23
  Speaker 6: five points on average. So the president is migrating into
• 10:27
  Speaker 6: what is a very normal place for presidents to move
• 10:30
  Speaker 6: into in their last couple of years in office, which
• 10:33
  Speaker 6: is foreign policy.
• 10:34
  Speaker 4: I seem to have something in the back of my mind,
• 10:35
  Speaker 4: you know, I spent the last week on a beach.
• 10:38
  Speaker 3: How about the government staying open? Where are we in that?
• 10:41
  Speaker 6: Oh, we got some really good news on that front.
• 10:44
  Speaker 6: The House is moving forward with the six remaining bills,
• 10:46
  Speaker 6: even the very contentious online security package, And I'm very
• 10:50
  Speaker 6: hopeful that they'll be able to clear the rule later
• 10:51
  Speaker 6: on and get that sort of big package of six
• 10:55
  Speaker 6: appropriations bills over the Senate by the time they get
• 10:58
  Speaker 6: back next week and we can have a shutdown. So
• 11:00
  Speaker 6: I think we're on the right path with that one.
• 11:04
  Speaker 5: But there's no resolution on healthcare right. Republicans have not
• 11:07
  Speaker 5: come up with a way to make or keep healthcare
• 11:11
  Speaker 5: plans affordable for Americans who do rely on the Obamacare exchanges.
• 11:16
  Speaker 6: No, there's no solution to the ACA subsidies. And again,
• 11:19
  Speaker 6: I think that goes back to the President having a
• 11:22
  Speaker 6: situation where Congress is not capable of passing legislation, so
• 11:25
  Speaker 6: he pivots to foreign policy in lieu of domestic legislation,
• 11:29
  Speaker 6: So an ACA subsidy extension. You know, my colleague expense
• 11:32
  Speaker 6: or Pearlman has been on the contrary side of this
• 11:35
  Speaker 6: for many months now, but it's still proving accurate. There's
• 11:37
  Speaker 6: just no way to get past the impass Republicans have
• 11:40
  Speaker 6: on the High Amendment and abortion legislation, the income caps,
• 11:45
  Speaker 6: the applicability of the ACA subsidies. There's just not a
• 11:48
  Speaker 6: path forward at this time. The House is acted on
• 11:52
  Speaker 6: a three year extension, but the Senate it's not going
• 11:53
  Speaker 6: to pass that bill.
• 11:54
  Speaker 3: Henrietta about thirty seconds left.
• 11:56
  Speaker 4: Should we expect any legislation from this Congress in twenty
• 11:59
  Speaker 4: twenty six?
• 12:01
  Speaker 6: I don't think so. My adds of a second reconciliation
• 12:03
  Speaker 6: bill are inordinately low. I'm at twenty percent, and that's
• 12:06
  Speaker 6: really trying to be generous. I don't see a path
• 12:08
  Speaker 6: forward for material legislation this year. It's going to be
• 12:10
  Speaker 6: keep the lights on. More bailouts for farmers I think
• 12:13
  Speaker 6: are obviously coming. We'll get fifteen billion dollars added in
• 12:16
  Speaker 6: this latest bill that brings us to a total of
• 12:18
  Speaker 6: thirty billion dollars for farmers, and we're going to try
• 12:20
  Speaker 6: to keep doing that with the Highway bill, with the
• 12:23
  Speaker 6: farm bill, and those pieces of sort of must pass legislation.
• 12:26
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 12:33
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• 12:48
  Speaker 4: The weekend, Greenland became front and center once again. President
• 12:51
  Speaker 4: Trump talking about having tariffs on some of the European
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  Speaker 4: countries that are pushing back on some of the presidents
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  Speaker 4: moves towards a Greenland. Next guest suggest maybe they should
• 13:01
  Speaker 4: rethink that, Mark Champion, he's a calmness for Bloomberg opinion
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  Speaker 4: as late as a calm is entitled Europe can't afford
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  Speaker 4: a throwdown over Greenland.
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  Speaker 3: Mark, thanks so much for joining us here. Why do
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  Speaker 3: you write that? How do you think Europe will respond
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  Speaker 3: or should respond?
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  Speaker 7: Well, I mean we can see that they are. I mean,
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  Speaker 7: so they're right in principle in everything that they say.
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  Speaker 7: You know that they've had enough that Trump is using trade,
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  Speaker 7: you know, for reasons that it's really shouldn't be used,
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  Speaker 7: is using it as leverage in order to basically break
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  Speaker 7: international law and demand that another country hands over sovereignty
• 13:44
  Speaker 7: over a piece of territory. He has no good reason
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  Speaker 7: for doing it. He's given various reasons. They simply don't
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  Speaker 7: stand up. The US can do everything that they need
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  Speaker 7: to do in Greenland without having to take it. They
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  Speaker 7: already have a treaty that allows them to do anything more.
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  Speaker 7: Or less, so you know, the European the outrage is
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  Speaker 7: completely understandable. The difficulty is if they get into a
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  Speaker 7: trade war, like Prince President Emineuel Macaron is suggesting that
• 14:12
  Speaker 7: they fire this so called trade bazooka that was designed
• 14:17
  Speaker 7: for exactly this sort of purpose, where a foreign country
• 14:21
  Speaker 7: is misusing trade in order to pressure the EU. If
• 14:29
  Speaker 7: they do that, as Trump has already known, then he
• 14:33
  Speaker 7: will escalate. If they escalate, they need to think of
• 14:36
  Speaker 7: where they get to and whether they will be able
• 14:39
  Speaker 7: to stay together and whether they will be able to resist.
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  Speaker 7: And the real problem here, and the point that I
• 14:49
  Speaker 7: was trying to make, is these things are ultimately not
• 14:51
  Speaker 7: determined by principle but by power, and Europe lacks the power.
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  Speaker 7: Trump has that leverage, not necessarily because of trade. If
• 15:00
  Speaker 7: it was just about trade, the EU could could you know,
• 15:03
  Speaker 7: properly stand its own. The real problem is that they
• 15:07
  Speaker 7: are so dependent in terms of security. They care about NATO,
• 15:10
  Speaker 7: they care desperately about NATO. He does not, you know,
• 15:15
  Speaker 7: they care very much about what happens in Ukraine, and
• 15:18
  Speaker 7: that Ukraine should you know that the Russian forces to
• 15:21
  Speaker 7: be stopped in Ukraine and not allowed to go further west,
• 15:24
  Speaker 7: he does not, So this is where they have a
• 15:27
  Speaker 7: real problem.
• 15:28
  Speaker 5: And you point out that you're already seeing a splintering
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  Speaker 5: in that European defense, or that that rallying of European nations.
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  Speaker 5: Italy notably did not send anyone to Greenland to fight
• 15:42
  Speaker 5: this kind of symbolic or to put up a symbolic
• 15:46
  Speaker 5: defense against the US's goals for that that island. How
• 15:50
  Speaker 5: are you thinking of this divide and conquer strategy that
• 15:54
  Speaker 5: the US is employing or is it? It's not really
• 15:56
  Speaker 5: much of one. All it has to do is kind
• 15:57
  Speaker 5: of poke holes.
• 15:59
  Speaker 7: Well, well, that's it. And if there is, you know,
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  Speaker 7: if there is a kind of diabolical logic to what
• 16:04
  Speaker 7: Trump is doing, I suspect that this is it. He's
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  Speaker 7: very much on the record is believing that the or
• 16:09
  Speaker 7: saying that the EU is designed to rip off the
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  Speaker 7: United States. He'd like to see it dissolved. And trade
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  Speaker 7: is an area where one of the few areas where
• 16:23
  Speaker 7: the EU is truly united in terms of its you know,
• 16:28
  Speaker 7: foreign international presence, so you know the power to make
• 16:33
  Speaker 7: trade treaties and trade policy is concentrated in Brussels, not
• 16:37
  Speaker 7: in the capitals. So you know, he he would like
• 16:41
  Speaker 7: to break that down. It's much easier to deal with
• 16:45
  Speaker 7: the UK or France, or Germany or Denmark individually for
• 16:50
  Speaker 7: the US than it is to deal with them more collectively.
• 16:54
  Speaker 7: So you know, you can see that a kind of
• 16:57
  Speaker 7: logic to what he might be trying to do. But again,
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  Speaker 7: if he is, you cannot maintain an alliance that way.
• 17:05
  Speaker 7: And unfortunately, the risk, real risks of the Europeans is
• 17:09
  Speaker 7: that they are not ready to give up that alliance.
• 17:11
  Speaker 7: They still depend too much on the US nuclear umbrella,
• 17:15
  Speaker 7: too much on NATO, you know, US assets within NATO
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  Speaker 7: to have a kind of you know, meaningful deterrent against
• 17:24
  Speaker 7: fully militarized countries such as Russia or China, and it's
• 17:30
  Speaker 7: going to be you know, they're ten years away at
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  Speaker 7: least from being able to stand on their own in
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  Speaker 7: that sense, and that gives Trump a great deal of
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  Speaker 7: leverage in the short term.
• 17:42
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• 17:50
  Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,
• 17:54
  Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.
• 17:58
  Speaker 1: You can also Watch US live every weekday on YouTube
• 18:01
  Speaker 1: and always on the Bloomberg terminal