Entertainment giant Warner Bros. Discovery (WBD) certainly seems interested in being sold to Netflix (NFLX), so much so that it believes most of its shareholders want to go that route. Indeed, Warner believes that just under 7% of its shareholders are on board with Paramount Skydance (PSKY), and what Warner calls Paramount’s “inferior scheme.” Investors seemed oddly displeased about this, however, and sent Warner shares down fractionally in the closing minutes of Thursday’s trading.
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Paramount recently revealed that it was extending its deadline for getting Warner shareholders to sell their shares directly to Paramount at the $30 per share rate. Now, it will run until February 20. But this offer is cutting little ice with Warner itself, as it revealed that around 93% of shareholders have passed on Paramount’s offer to buy them out.
The immediate idea to change that, meanwhile, does not seem to have much support at Paramount. Some are suggesting that Paramount simply needs to raise its asking price from $30 per share to a higher number. Sources indicate that Paramount is not prepared to lay out that much cash to get hands on Warner, noting it was “…reaffirming its commitment to a transaction with WBD at a $108.4 billion enterprise value that is significantly greater and far more certain than the purported $82.7 billion enterprise value of the Netflix transaction.”
Proxy Battle is Go
Meanwhile, other reports noted that the potential for a proxy battle is now a reality. Paramount plans to ask shareholders to reject the deal with Netflix, reject the plan to spin off the cable channels into Discovery Global, and also reject all pay packages up for vote, including that of CEO David Zaslav.
Paramount may have unexpected allies in this. The idea that the Warner-Netflix deal would pass regulatory muster seems a bit unlikely right now, especially with bipartisan concerns emerging. Moreover, Netflix’s own shareholders may be revolting, as Netflix shares recently dropped to a 52-week low following its earnings report.
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on five Buys and 10 Holds assigned in the past three months, as indicated by the graphic below. After a 177.53% rally in its share price over the past year, the average WBD price target of $25.61 per share implies 9.63% downside risk.
