We have to admit that here Netflix advanced with a mask on its face. Last month, the group led by Reed Hastings firmly denied any intention to take over Warner, with numerous assurances of innocence.
Most notably, if it were to happen, the deal would leave Paramount Skydance-the most vocal potential acquirer about its ambitions, which was charging ahead without much caution-high and dry.
A Netflix-Warner merger would indeed cement domination in the North American media landscape, with a content library unmatched and 15% of global audience time captured by either one.
It would be closely followed by YouTube and, much further behind, by Disney with less than 9% of global audience time. In fifth place-behind NBCUniversal-Paramount Skydance would thus be neutralized and barred from the podium.
The group led by David Ellison, son of Oracle founder Larry Ellison, now seeks to challenge how Warner conducted discussions with its suitors for a sale.
Reputed for its proximity to Donald Trump, the Ellison family has a card to play. In this regard, if the administration gets involved, there is no doubt the coming weeks will be feverish behind the scenes.
On strictly financial criteria, it is not surprising that Warner preferred Netflix's offer of $27.5 per share, even if it was lower than Skydance's, which proposed $30 per share.
Very well capitalized, Netflix paid largely in cash - 85% of the price - with the remaining 15% in Netflix stock-while Paramount's offer would have only added another mountain of debt on an already worrying debt pile. The new group would thus have emerged as a colossal figure with feet of clay.
Paramount, like Warner, faced three painful realities: first, streaming activity not yet profitable, otherwise very mediocre; second, a linear television business in structural and rapid decline; third, a colossal debt, precisely, whose repayment was jeopardized by the conjunction of these prospects.
Despite the probable guarantee brought by David Ellison and speculation about Middle Eastern sovereign wealth fund involvement, Netflix's offer appeared in every respect much more prudent. It should come as no surprise that Warner Bros creditors favored it.
In a strange coincidence that history buffs and seasoned investors will not fail to note: twenty-five years ago, the gigantic and cataclysmic AOL-Time Warner merger was announced, a few weeks before the first major tech stock bubble-the dot-com bubble-burst.
