Troubles for Netflix’s (NFLX) proposed acquisition of Warner Bros. Discovery’s (WBD) movie and television studios and HBO streaming service seem to be mounting. Senator Mike Lee, chairman of the Senate Judiciary antitrust subcommittee, has raised concerns about the impact of the Netflix-Warner Bros. deal, the Wall Street Journal reported. Furthermore, the Financial Times reported that several U.K. politicians and former policymakers have called on the country’s competition regulator to launch a “full review” into the proposed acquisition.
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Netflix is facing competition for the Warner Bros. Discovery acquisition from Paramount Skydance (PSKY), which extended its January 21 deadline to February 20 for its hostile bid. Recently, the Federal Communications Commission (FCC) Chair Brendan Carr told Bloomberg in an interview that Netflix’s proposed takeover of Warner Bros. Discovery creates “legitimate competition concerns.”
Senate Antitrust Panel Chair Questions Impact of Netflix-Warner Deal on Competition
Last week, in a letter to Netflix co-CEOs Ted Sarandos and Greg Peters and Warner Bros. Discovery CEO David Zaslav, Lee stated that the potential deal raises antitrust issues, including the risk of significantly reducing competition in the streaming space. He also highlighted worries about a potential abuse of the merger review process, particularly if an acquirer gains access to competitively sensitive data under the pretext of due diligence.
Lee added that he is concerned that the proposed deal “could operate as a so-called ‘killer non-acquisition,’ effectively weakening a major competitor through the pendency of the merger review process.”
A subcommittee hearing on the Warner-Netflix deal is scheduled for February 3. The U.S. Department of Justice (DOJ) will be reviewing Netflix’s deal. Netflix has agreed to pay $27.75 a share in an all-cash deal, valued at $82.7 billion. The DOJ will also review Paramount’s hostile bid for all of Warner Discovery, including its cable-networks unit. Paramount’s all-cash bid of $30 per share is worth $77.9 billion, with a total enterprise value of more than $108 billion, including debt.
U.K. Politicians Urge Competition Watchdog to Review Netflix-Warner Deal
Citing a letter to Sarah Cardell, chief executive of the Competition and Markets Authority (CMA), the Financial Times noted that a group of U.K. politicians and former policymakers raised concerns that the Netflix-Warner deal “will cement an already dominant player” in the streaming market.
The group contended that this deal could adversely impact competition and have “damaging consequences” for consumers, the U.K.’s creative industries, and the movie industry. The letter also noted concerns that the proposed deal would result in fewer choices for consumers. Additionally, some politicians are worried that the regulator may go easier on the deal, as the U.K. government has been urging it to support economic growth and to intervene less.
Meanwhile, Netflix has stated that it is in touch with regulators in all relevant jurisdictions, including the CMA. “This deal is pro-consumer, pro-innovation, pro-worker, pro-creator, and pro-growth,” said the streaming giant.
Wall Street’s Take on NFLX, WBD, PSKY Stocks
Amid the ongoing deal drama, Wall Street has a Moderate Buy consensus rating on Netflix and Warner Bros. Discovery stocks. Wall Street’s average price target indicates 35% upside potential in Netflix stock, but downside risk in WBD shares. Meanwhile, the consensus rating for Paramount Skydance is a Moderate Sell.
