So remember yesterday? Remember when we thought that Netflix (NFLX) would end up walking away with entertainment giant Warner Bros. Discovery (WBD)? That may not end up being the case after all, as the United States Department of Justice recently got involved. While this may not kill the deal altogether, it may have some unexpected ramifications. This did little for Warner’s share price, though, as shares slipped fractionally in the closing minutes of Thursday’s trading.
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It turns out, though, that the Justice Department does not want information about Netflix’s bid, but rather about Paramount Skydance’s (PSKY) bid. The Federal Trade Commission did note that Paramount filed correct notification and report forms, but the Justice Department put out a “…request…for additional information or documentary material relevant to the Offer.”
This in turn added an extra 10 calendar days on to the waiting period, until Paramount supplied the information in question. Further, Paramount’s hostile effort is going through, but does not seem to be going well. Reports note that fewer than 400,000 shares have been validly tendered already, but with somewhere around 2.48 billion shares outstanding, crossing that particular finish line seems unlikely.
Paramount Defends Itself, Again
While Warner has rejected the latest offer, noting that it was not “…even comparable” to the one Netflix made, Paramount is not taking that assessment lying down. In fact, Paramount went right for the throat, asserting “Paramount’s offer is superior to WBD’s existing agreement with Netflix and represents the best path forward for WBD shareholders.”
Indeed, Paramount’s offer is all-cash, while Netflix’s is cash-and-stock. Paramount also wants all of Warner, while Netflix only wants the studio and streaming arms. The idea that Discovery Global has additional value is somewhat shaky, particularly given the stock performance over at Versant (VSNT) so far. Warner, however, still maintains that this is a “leveraged buyout,” staged by a far smaller participant.
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on seven Buys and nine Holds assigned in the past three months, as indicated by the graphic below. After a 194.74% rally in its share price over the past year, the average WBD price target of $24.98 per share implies 11.81% downside risk.
