Paramount Skydance Shares Plunge 16.5% After Netflix Secures Warner Bros. Deal in Bidding Showdown

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Shares of Paramount Skydance fell 16.5 percent this week and dropped 9.8 percent on Friday after Netflix announced plans to acquire Warner Bros. Discovery's studio and HBO Max streaming business.

The decline marked the largest percentage loss among S&P 500 companies for the period.

Netflix offered a deal valuing Warner Bros. Discovery at $30.75 per share, which includes $27.75 per share in cash and collared stock for the studio and streaming assets plus an estimated $3 per share from a spinoff of cable operations, totaling about $74 billion.

Paramount Skydance (PSKY) submitted a $30-per-share all-cash bid for the entire company on Thursday morning, yet Warner Bros.

Discovery's board accepted Netflix's proposal within 24 hours after giving Paramount Skydance six opportunities to improve its offer. Warner Bros.

Discovery executives expressed confidence in Netflix's bid due to a $5.8 billion breakup fee and available cash reserves.

Paramount Skydance attorneys sent a letter to Warner Bros. Discovery chief executive David Zaslav questioning the bidding process.

The letter states:

"WBD appears to have abandoned the semblance and reality of a fair transaction process, thereby abdicating its duties to stockholders, and embarked on a myopic process with a predetermined outcome that favors a single bidder."

Paramount Skydance cited media reports of Warner Bros. Discovery management's preference for Netflix, including descriptions of a potential Netflix deal as a "slam dunk" and mentions of strong chemistry between the companies' leaders.

The letter also referenced a meeting in Brussels between Warner Bros. Discovery's international president Gerhard Zeiler and European Union Commission Vice President Hena Virkkunen, where concerns arose over media concentration in a potential Paramount merger.

Paramount Skydance requested confirmation on whether Warner Bros. Discovery formed an independent special committee to oversee the process and urged its creation to ensure fairness.

A media executive with direct knowledge of the situation said:

“They are really pissed over at Paramount Skydance. They think this was a rigged deal process because of the friendship between the CEOs and they’re betting the shareholders will be pissed when they find out what went down.”

Paramount Skydance owners David Ellison and Larry Ellison plan to appeal directly to Warner Bros. Discovery shareholders and consider a higher counterbid, potentially around $35 per share to cover the breakup fee.