Warner Bros. and Netflix Deal Faces New Turn

The battle over control of Warner Bros. Discovery (WBD) has hit a new snag, with Jared Kushner’s private equity firm pulling out of supporting Paramount Skydance’s hostile takeover bid. Affinity Partners, Kushner’s company, was originally backing Paramount’s bid, which threatened to disrupt the $83 billion deal that WBD had made with Netflix earlier in December.

“After weighing our options with two strong competitors in the running for this unique American asset, Affinity has decided to step back from pursuing this opportunity,” a spokesperson for the company shared in a statement to NBC News.

The entry of Kushner into the WBD takeover battle, given his connections to former President Donald Trump, added a political dimension to the struggle that is seen as shaping the future of the entertainment and streaming industry in the U.S. The withdrawal of Kushner’s firm dealt a blow to Paramount, which was also receiving financial support from CEO David Ellison’s family and several Gulf state wealth funds.

On December 5, Netflix and WBD had announced a deal in which Netflix would acquire WBD’s TV and film studios in a transaction valued at approximately $82.7 billion. However, just days later, Paramount made a hostile takeover bid of $108.4 billion for the entire WBD, offering shareholders $30 per share compared to Netflix’s $27.75 cash and stock offer. Paramount believed their bid offered more value and regulatory certainty for shareholders.

Apart from Affinity, Paramount’s bid was backed by financing from Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority, and the Abu Dhabi Investment Authority. The offer also had the implicit support of Trump, who expressed reservations about the Netflix-WBD deal.

While WBD had initially stated that they would consider Paramount’s offer, reports from The Wall Street Journal and Bloomberg suggested that the WBD board would soon be recommending shareholders to reject the offer and stick with the original deal with Netflix.

Through all this, there have been various statements from the involved parties. Affinity Partners mentioned that the investment dynamics had shifted significantly since their involvement in October but still believed in Paramount’s offer. Paramount emphasized the strategic and financial benefits of their bid over Netflix’s, terming the latter as offering uncertain value and a complex mix of equity and cash.

As the situation unfolds, any final deal between WBD and either Netflix or Paramount will need approval from the Department of Justice and the Federal Trade Commission. Netflix is currently facing a consumer lawsuit over the deal, with lawmakers expressing concerns about competition in the media sector and national security implications, particularly in relation to Paramount’s bid.

In the coming days, it will be interesting to see how this high-stakes battle over Warner Bros. Discovery plays out and what it means for the future of the entertainment and streaming industry.