The move to acquire entertainment giant Warner Bros. Discovery (WBD) just got even more complicated. With Paramount Skydance (PSKY) getting its bid mostly rejected and taking its case to shareholders directly, while Netflix (NFLX) currently stands as the frontrunner, there is a new wrinkle to consider as Starz (STRZ) put in a bid of its own. But Starz put its bid in for perhaps the most unlikely sector. The news threw a further pallor over the whole picture, and sent Warner shares down over 2.5% in the closing minutes of Thursday’s trading.
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Starz is perhaps best known as a sort of equivalent to HBO. Its history is actually fairly lengthy and involves ownership by multiple companies at one point or another, including both Anchor Bay and Lionsgate Studios (LION). And apparently, last month, Starz showed up out of almost nowhere to put in a bid for Warner’s cable networks, as well as 20% of the studio and streaming operations.
Warner revealed as much in a recent Securities and Exchange Commission (SEC) filing, dubbing Starz “Company C” in the filing. Starz’s bid for the parcel desired was a hefty $25 billion dollars, and all in cash as well. Starz also proposed a “90-day exclusivity period,” but none of Warner’s other suitors at the time did. Starz was reportedly eager to land parts of the business that no one was seemingly interested in at the time, though Paramount did ultimately pursue those parts as well.
Any Hope for Paramount?
Paramount’s hostile plan, meanwhile, does not seem to be going well. Warner referred to the $108 billion bid as “illusory,” and pointed out several glaring omissions in the bid itself, including points of transparency and overall financing. This in turn led to some wondering if there was, at any point, any hope for Paramount to win here.
While there are still substantial concerns about regulatory feedback on this one, Paramount’s plan to buy shares directly from shareholders may not work so well either. Warner shareholders may like the idea of selling to the Ellisons directly, but may believe that a better offer is still to come. So why sell now if Paramount may be inclined to sweeten the pot still further to get Warner shareholders to defy the board?
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on eight Buys and 12 Holds assigned in the past three months, as indicated by the graphic below. After a 162.92% rally in its share price over the past year, the average WBD price target of $23.61 per share implies 14.19% downside risk.
