Six Months, 9 Offers and $81 Billion. How Hollywood’s Nasty Takeover Was Won.
Paramount’s David Ellison used his wealth and influence to get Warner
Paramount, led by David Ellison, won a bidding war to acquire Warner Bros. Discovery for $81 billion after Netflix withdrew its offer.
The acquisition gives the Ellison family control over a vast media empire including HBO, CNN, CBS News, and Warner Bros. studio.
Paramount’s stock price rose over 20% and Netflix’s surged nearly 14% on Friday following the announcement of the deal’s conclusion.
For six months, the son of one of the world’s richest men kept hearing the same unfamiliar word: No.
Even before he closed a deal to combine his company with a much bigger one, David Ellison was already plotting to do it again. Once his Skydance Media took control of Paramount PSKY 20.84%increase; green up pointing triangle, he turned his attention to a Hollywood icon, launching an audacious takeover bid for Warner Bros. Discovery WBD -2.19%decrease; red down pointing triangle that would give the Ellison family control of a sprawling media empire.
His first offer was swatted away. So were his second and third. By the time Ellison made his sixth offer, Warner Chief Executive Officer David Zaslav stopped responding to his texts. Even when Warner officially accepted a rival offer from Netflix NFLX 13.77%increase; green up pointing triangle, Ellison refused to take no for an answer.
As the battle dragged on, Ellison sweetened his offers, ratcheted up the pressure, took the hostile bid directly to shareholders, threatened a bruising proxy fight, brought in President Trump allies to lobby, and treated the existing term sheet like paper waiting to be shredded.
On the ninth offer, the wealth and influence of the Ellisons finally won.
The dramatic bidding war ended on Thursday night, after Paramount made its latest attempt to buy Warner for $81 billion—and Netflix walked away from the deal. Shortly after photographers snapped Netflix co-CEO Ted Sarandos leaving the White House, the company announced that it wouldn’t match Ellison’s latest offer, which was 63% higher than his first.
And once Netflix dropped its own $72 billion deal for Warner’s studios and HBO Max streaming business, the scion of software billionaire Larry Ellison was poised to become one of the most powerful people in a town that once derided him as a nepo-baby.
Ellison, 43 years old, as Paramount chief executive will now control much of our attention: the shows we watch, the news we consume and the screens we stare at all day long, with a family portfolio that will include HBO, CNN, CBS News, the historic Warner Bros. studio lot and crown jewels such as DC Comics and Harry Potter.
As much as Ellison and his team had been telling anyone who would listen that his business would ultimately prevail in buying a company five times its size, the reaction on Friday from Hollywood to Washington to Wall Street was astonishment.
Paramount’s stock price shot up over 20% on Friday. Netflix’s surged nearly 14%. Politicians howled at the prospect of so much media power being consolidated in the hands of a single family. Thousands of employees across three companies were left wondering what comes next at a time when the future of the entertainment business has rarely been so uncertain.
Even the CEO at the center of the action said he was surprised by the ending.
“We all thought it was going to be Netflix,” Zaslav told staffers in a companywide town hall, adding that the speed of the drama “feels a little whiplashy.”
The deal could take anywhere from six to 18 months to close. Ellison will need to cut a lot of costs to find $6 billion in savings to make the deal work. But that didn’t stop Paramount’s leadership from popping Champagne, which they drank out of paper cups, Thursday afternoon.
Only days earlier Paramount was preparing its next move if it didn’t win. It had a slate of director nominees lined up for a proxy fight and planned to submit them as soon as this past week if Warner refused to accept Paramount’s latest, sweetened offer, according to people familiar with the matter.
Late last Saturday night, Ellison called Zaslav with the structure of the deal that met Warner’s demands. The duo talked again on Sunday and Monday as they scrambled to get as much settled as possible for a Monday midnight deadline to stop talking, people familiar with the matter said. Ellison promised his father would contribute additional funding to satisfy lenders, if needed.
Meanwhile, Netflix executives were discussing standing down. Sarandos and fellow co-CEO Greg Peters had said they would be disciplined on price, and if Paramount was going to increase its offer to $31 a share plus add-ons, the company would likely bow out, said people familiar with the discussions.
Ellison began his quest in earnest with a September visit to Zaslav’s Beverly Hills home, once owned by legendary Paramount studio chief Robert Evans. Ellison proposed a $19-per-share cash-and-stock bid for the company and followed up with a formal letter.
Warner rejected the Ellison overture as inadequate, favoring Zaslav’s existing plan to split the media and entertainment empire in two—one company for the movie and TV studios and HBO Max, the other containing TV networks including CNN and Food Network.
Paramount made two more offers, at one point even offering Zaslav the opportunity to be co-chairman and co-CEO of the combined company with Ellison if a deal happened.
Unpersuaded, Warner in October announced a strategic review, effectively setting up an auction.
Netflix’s Sarandos had told associates that if Warner did go through with spinning off its cable networks, he wanted to make a play for the streaming and studio businesses, according to people familiar with the discussions.
Netflix executives internally have over the years discussed how M&A might help the company grow, which would be a departure from its long-held preference for building rather than buying, said people close to the discussions.
Before Ellison bought Paramount, Netflix had approached former Paramount controlling shareholder Shari Redstone about buying the company’s studio a number of times. But she didn’t want to sell, according to people familiar with the situation. The company had also discussed bidding for MGM, said people familiar with the discussions.
In November, Netflix offered to buy Warner’s studios and HBO Max streaming business. So did Comcast.
In December, Ellison lobbed in his sixth bid, saying Paramount had offered a package that covered all the issues Warner had raised, including the need for “strong cash value” and “speed to close.”
Soon after, Warner declared Netflix victorious. It agreed to sell the key assets for $27.75 a share, or $72 billion.
Three days later, Paramount announced it was taking a tender offer directly to shareholders.
As Ellison doubled down, Warner and Netflix signaled to the market that their deal was moving forward. Warner distributed photos of Zaslav walking the Warner Bros. studio lot in Burbank with Sarandos and Peters, smiling in front of the studio’s famed water tower. Paramount executives shared the photos among themselves, and some rolled their eyes over them, according to people close to the company.
Meanwhile, Ellison was making inroads in Washington. He offered assurance to Trump administration officials that if he bought Warner, he’d make sweeping changes to CNN, a common target of President Trump’s ire, The Wall Street Journal first reported.
Just days after going hostile, Ellison sat in President Trump’s box at the Kennedy Center honors. Paramount chief legal officer Makan Delrahim, the former Trump Justice Department antitrust head, oversaw a lobbying campaign that encouraged Republican lawmakers and administration officials to question Netflix’s bid. Delrahim himself ramped up the pressure, touting Paramount’s messaging online and engaging in the deal talks, including by holding meetings with investors.
For his part, Sarandos had been laying the groundwork for the Netflix deal for some time—going back and forth to D.C., said people familiar with the situation. Netflix had hired its own veteran of the first Trump administration, Clete Willems, who had a team of GOP advisers, including Kellyanne Conway and Brian Ballard.
Netflix was working with a deficit of political support from the start, because they could not rely on Democrats, Hollywood’s natural allies. Top Democrats such as Sen. Elizabeth Warren (Mass.) opposed the merger from the start.
In January, Ellison ramped up the pressure. Paramount threatened to run a proxy fight to secure seats on Warner’s board and filed a lawsuit seeking to force Warner to release more information about its deal with Netflix.
Netflix shareholders were steadily losing patience. The company had over $170 billion wiped off its market value since last September, when reports started to surface that it could be a potential bidder for Warner.
Senators from both major political parties grilled Sarandos at a February Judiciary Committee hearing, expressing concern about the market power of a Netflix-Warner tie-up. Sarandos said repeatedly that Netflix was committed to maintaining the Warner Bros. studio theatrical-movie business and planned to continue to operate itself and HBO Max as separate entities.
The tide began to shift in Paramount’s favor in mid-February. Paramount indicated to Warner that it would up its price to $31.
In a key move that helped get Warner’s attention, Paramount amended its proposal to add an unusual takeover provision, what it called a “ticking fee” of 25 cents a share, which it would pay to Warner shareholders for each quarter its deal hasn’t closed, starting January 2027. Paramount said it would pay the $2.8 billion termination fee Warner would owe Netflix if that deal collapsed.
Netflix agreed to allow Warner to discuss Paramount’s latest proposal during a seven-day negotiating period ending on Feb. 23, saying it would clear up the situation once and for all.
After the negotiating window ended, Warner’s board said it determined that Paramount’s newest offer could reasonably be expected to lead in a deal superior to its existing one with Netflix. In addition to raising the price to $31 a share, Paramount increased its regulatory termination fee to $7 billion and accelerated the ticking fee to start after Sept. 30 rather than next year.
In the days before Paramount’s revised bid was submitted, Netflix executives discussed walking away instead of continuing the bidding war, according to people close to the discussions.
Meanwhile, Sarandos forged on with plans to meet with officials in D.C., Thursday, including acting Assistant Attorney General Omeed Assefi.
Sarandos was preparing for a separate meeting with White House officials that day when he got a phone call.
It was Zaslav, and he had bad news for Sarandos. The Warner board had decided Paramount’s latest offer was superior.
Soon after receiving that call, Netflix announced that it was walking away.
On Friday, Paramount paid a breakup fee of $2.8 billion to Netflix.