Key Points
- The California Department of Justice has opened an investigation into Paramount’s proposed acquisition of WBD following Netflix’s withdrawal from the bidding.
- Attorney General Rob Bonta said the deal has not cleared regulatory scrutiny and pledged a “vigorous” state review of the transaction.
- WBD’s board deemed Paramount’s $31-per-share offer superior, prompting Netflix to exit after declining to match the revised bid.
The California Department of Justice has launched an investigation into Paramount’s proposed offer to acquire Warner Bros Discovery (WBD), which is likely to move forward following the surprise announcement that rival entertainment giant Netflix has abandoned its interest in parts of WBD’s business.
In a statement late Thursday evening, California Attorney General Rob Bonta said both offers for WBD have not received regulatory approvals from federal or state agencies, and the state DOJ intends to probe the matter.
“Paramount-Warner Bros is not a done deal,” Bonta said. “These two Hollywood titans have not cleared regulatory scrutiny. The California Department of Justice has opened an investigation, and we intend to be vigorous in our review.”
It isn’t clear what the state DOJ’s investigation entails, or whether attorneys from the agency have solicited information or materials from Paramount or WBD. Both companies have television and film production studios in the greater Los Angeles area and employ thousands of people in the state. Paramount also owns six television stations in California: Two each in Los Angeles, San Francisco and Sacramento.
On Thursday, WBD’s Board of Directors said it determined Paramount’s revised offer was “superior” to one accepted by Netflix last year, which has been amended several times. Earlier this month, Netflix said it would give WBD a grace period to evaluate offers from Paramount after the latter company made numerous unsolicited, and at times, hostile bids.
Paramount’s latest offer valued WBD at $31 per share and offered other contingencies like a break-up fee paid to Netflix and a separate one offered to WBD if the deal was unable to secure regulatory approvals.
Despite feeling Paramount’s offer was superior, WBD said it was moving forward with Netflix’s offer. But it gave Netflix four days to match or exceed Paramount’s bid. Less than three hours later, WBD had its answer: Netflix was no longer interested.
In a statement, Netflix co-CEO Ted Sarandos said the streaming giant still felt like its offer was superior for WBD and that it would gain regulatory approvals, but the company felt the bidding war with Paramount had reached a point where the transaction was no longer financially attractive.
Netflix’s deal would have required WBD to move forward with a plan to spin out its cable networks business — CNN, TBS, TNT, Cartoon Network, Adult Swim, Discovery Channel and Animal Planet among them — while Paramount’s offer was for the entire company.
Shares of Netflix and Paramount were higher in after-hours trading, while WBD’s stock price was down around 2 percent.
