By Aditya Soni
Feb 11 (Reuters) – Activist investor Ancora Holdings has built a stake in Warner Bros Discovery and plans to oppose the media company’s deal with Netflix for its studios and streaming assets, in the latest twist to the heated Hollywood takeover battle.
Ancora, which has a stake worth nearly $200 million, said on Wednesday that Warner Bros’ board did not adequately engage in talks with Paramount Skydance over a rival offer for the whole company, including cable assets such as CNN and TNT.
The activist investor with $11 billion in assets under management said it would vote against the Netflix deal at a Warner Bros shareholder meeting expected by April unless the company reverses its recommendation backing the acquisition.
“The currently proposed Netflix-WBD deal asks shareholders to accept inferior value, gamble on an uncertain spinoff and shoulder significant regulatory risk — despite the availability of a higher value and more certain $30 per share offer from Paramount,” the activist investor said on its website.
Warner Bros has a market capitalization of about $68 billion, according to LSEG data, implying that Ancora’s stake represents less than 1% of its outstanding shares.
“We remain resolute in our commitment to maximize value for shareholders,” the media company said in a statement.
Paramount and Netflix did not immediately respond to Reuters requests for comment.
Both the companies covet Warner Bros for its leading film and television studios, extensive content library and major franchises such as “Game of Thrones,” “Harry Potter” and DC Comics superheroes like Batman.
PARAMOUNT’S PUSH TO WIN OVER WARNER BROS SHAREHOLDERS
To sway investors, Paramount on Tuesday sweetened its bid by offering Warner Bros investors about $650 million in extra cash for each quarter the deal fails to close after this year and agreeing to cover the $2.8 billion breakup fee the HBO owner would owe Netflix if it walked away.
It did not increase its bid worth $108.4 billion including debt, but stressed again that its offer has a clearer path to regulatory approval than the Netflix deal of $27.75 per share, or $82.7 billion including debt.
Warner Bros said it would review the revised offer, but did not change its recommendation in support of the Netflix deal.
Paramount had last month extended the deadline for its tender offer to February 20 to convince investors. Analysts and Warner Bros executives have suggested that the CBS owner would have to raise its offer to restart deal talks.
Ancora, however, said that Paramount’s improved offer was sufficient to potentially qualify as a superior proposal under the Netflix agreement, clearing the way for renewed talks.
The investor also backed Paramount’s argument that the Netflix deal leaves Warner Bros shareholders exposed to uncertainty, since the cash they receive would depend on the financial health of the cable assets to be spun off into Discovery Global ahead of the acquisition.
Paramount believes the cable assets are worthless and has pointed to the valuation of Versant, a Comcast spinoff that owns digital assets and TV channels such as CNBC and whose shares have fallen about 35% since their January listing.
“WBD is asking shareholders to vote for an uncertain final cash consideration based on an unknown debt allocation and an unknown equity value,” Ancora said.
ANTITRUST HURDLES
Ancora also highlighted the antitrust hurdles the Netflix-Warner Bros deal may face given it would make Netflix the largest streaming service globally with roughly half a billion subscribers.
The U.S. Department of Justice is examining whether the streaming pioneer engaged in anti-competitive practices as part of its regulatory review of the deal, according to reports.
To defend its deal, Netflix has pointed out Google’s YouTube accounts for more viewing time on U.S. televisions than other streaming services.
The DOJ is also reviewing the Paramount bid.
Paramount said on Tuesday it certified compliance with a second request from the Department of Justice on Monday, triggering a 10-day waiting period, and has secured foreign-investment clearance in Germany.
It was also in talks with antitrust regulators in the U.S., the European Union and the UK.
“Antitrust concerns are bigger for Netflix than for Paramount because the deal will likely substantially lessen competition in multiple markets,” Ancora said.
Netflix is betting on a “Hail Mary” path to approval, it added.
(Reporting by Aditya Soni in Bengaluru; Editing by Arun Koyyur)
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