By Hernan Lopez.
Companies mentioned: Comcast, Instagram, Netflix, WB, Paramount Skydance, Spotify, YouTube
Questions answered: How could a Netflix-HBO combo drive both lower prices and better shareholder returns? Why is WBD selling for 4x what Paramount sold for only a year ago? Is the bidding over?
“A successful exit requires one really willing and able buyer plus at least the perception of another one,” a seasoned investment banker once told me. In 2014, Fox made an all-stock $80B offer for Time Warner. Jeff Bewkes rejected it not because he thought it was a bad offer, but because he correctly assessed that no other company was able to compete at that level at that time (it was bought by AT&T two years later for $85B).
I thought about that principle last June when on-again, off-again acquisition talks between Skydance and Paramount reached a stalemate, driving Paramount’s enterprise value down 10% to ~$20B.