<\/p>\n
The Netflix Inc plans that clinched the deal for Warner Bros Discovery Inc started to shape up around Thanksgiving.<\/p>\n
A\u00a0deadline was looming: Warner Bros had asked bidders, which also included Paramount Skydance Corp and Comcast Corp, to have their latest proposals and contracts in by the Monday after the holiday, following a round about a week earlier. The suitors were told to put their best foot forward.<\/p>\n
Read: Warner Bros is said to begin exclusive deal talks with Netflix<\/p>\n
While most Americans were watching football and feasting on turkey, Netflix executives and advisers hunkered down to finalise a binding offer and a $59 billion bridge loan from banks, one of the biggest of its kind.<\/p>\n
That gave the streaming company the ammunition to make a mostly cash-and-stock bid that helped it prevail over Comcast and David Ellison\u2019s Paramount, according to people familiar with the matter. The resulting\u00a0$72 billion deal, announced Friday, is set to bring about a seismic shift in the entertainment business \u2014 if it can survive intense regulatory scrutiny and a potential fight from Paramount.<\/p>\n
This account of Netflix\u2019s surprise victory in the biggest M&A auction of the year is based on interviews with half a dozen people involved in negotiations. They asked not to be identified because the details are confidential.<\/p>\n
Read:
Canal+ calls Warner\u2019s bluff as Discovery, CNN set to disappear from DStv
Netflix offers mostly cash for Warner Bros in new bid round
\u2018Wednesday\u2019 win for Netflix at the Advertising Regulatory Board<\/p>\n
The sales process had\u00a0kicked off\u00a0with several unsolicited bids from Paramount Skydance, itself a newly formed company after a merger this year\u00a0orchestrated by Ellison. He\u2019s now the studio\u2019s chief executive officer and controlling shareholder, with backing from his father, Oracle Corp billionaire Larry Ellison.<\/p>\n
Paramount\u2019s early move gave it a head start in the bidding process weeks before other would-be buyers got access to information.<\/p>\n
\nBut the post-Thanksgiving deadline for second-round bids became a turning point by giving Netflix time to catch up and assemble the documents it needed\u2026<\/p>\n
\n\nADVERTISEMENT<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n<\/blockquote>\n
And since the streaming giant was bred in the fast-paced ethos of Silicon Valley, it could move quickly. When the binding bids arrived that Monday, Netflix\u2019s offer emerged as superior, the people said.<\/p>\n
One issue was the Warner Bros camp had doubts about how Paramount would pay for the company, which owns sprawling Hollywood studios, the HBO network and a vast film and TV library.<\/p>\n
Paramount\u2019s offer included financing from Apollo Global Management Inc. and several Middle Eastern funds, and it had conveyed that its bid was fully backstopped by the Ellisons. Still, Warner Bros executives were privately concerned about the certainty of the financing, people familiar with the matter said.<\/p>\n
Representatives for Netflix and Warner Bros declined to comment.<\/p>\n
\u2018Noble\u2019 vs \u2018Prince\u2019<\/h3>\n
In the weeks leading up to the finale, Warner Bros advisers set up war rooms at various hotels in midtown Manhattan. A core group holed up at the Loews Regency, which has long been a convening spot for the city\u2019s movers and shakers.<\/p>\n
Inside Warner Bros, the situation was known as \u201cProject Sterling.\u201d The company called itself by the code name \u201cWonder.\u201d The team referred to Netflix as \u201cNoble,\u201d while Paramount was \u201cPrince\u201d and Comcast was \u201cCharm.\u201d<\/p>\n
At Netflix, Chief Financial Officer Spencer Neumann served as the point man while corporate development head Devorah Bertucci organized people day-to-day. Chief Legal Officer David Hyman and Spencer Wang, vice president of finance, investor relations and corporate development, also were key architects, with all of them reporting into co-CEOs Ted Sarandos and Greg Peters.<\/p>\n
The contours of the deal were shaped in a way befitting of a tech company: mostly over video chat or phone rather than in person. Virtual war rooms were set up.<\/p>\n
Listen\/ read: Netflix offers mostly cash for Warner Bros in new bid round<\/p>\n
\n\nADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
While strategizing or discussing diligence on Zoom, participants would raise virtual hands or make suggestions over chat rather than unmuting and slowing down the meeting. Google Docs were used to review and edit documents together in real time.<\/p>\n
Talks heated up this week, with Warner Bros advisers in continuous dialogue with the bidders and negotiating contract language and value. Comcast said it would merge\u00a0its NBCUniversal division with Warner Bros. Paramount offered to\u00a0more than double\u00a0its proposed breakup fee to $5 billion to sweeten its deal and outshine rivals.<\/p>\n
In the end, Warner Bros determined Netflix had the best offer and the company was the most flexible on key terms.<\/p>\n
\nOn Wednesday, Paramount lobbed an aggressively worded letter to Warner Bros board saying the sales process was \u201ctainted.\u201d<\/p>\n<\/blockquote>\n
It also identified what it saw as regulatory risks in the Netflix proposal, one sign that a winning outcome was slipping away for Paramount.<\/p>\n
Netflix found out Thursday evening New York time that it had won. Executives and advisers were assembled on a video call when they got the official word, sparking a moment of jubilation before everyone snapped into action. By 10:25 p.m., Bloomberg News broke the news that a deal was imminent.<\/p>\n
Even Sarandos made it sound like the ending was a twist on a conference call with investors. \u201cI know some of you are surprised that we\u2019re making this acquisition, and I certainly understand why,\u201d he said. \u201cOver the years, we have been known to be builders, not buyers.\u201d<\/p>\n
Regardless of whether Paramount reemerges to try and top the bid, Netflix will have work ahead of it. It has agreed to pay a\u00a0$5.8 billion breakup fee to Warner Bros, if the transaction fails on regulatory grounds. The company also has to digest its largest acquisition ever.<\/p>\n
\u201cIt\u2019s going to be a lot of hard work,\u201d co-CEO Peters said on the conference call. \u201cWe\u2019re not experts at doing large-scale M&A, but we\u2019ve done a lot of things historically that we didn\u2019t know how to do.\u201d<\/p>\n
\u00a9\u00a02025\u00a0Bloomberg<\/p>\n
Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n