Warner Bros Discovery rejects Paramount’s hostile takeover bid, New to Know

Imagine two giant castles. One castle owns Harry Potter and Batman. That castle is Warner Bros Discovery (WBD). The other castle owns SpongeBob and Top Gun. That castle is Paramount. Recently, the Paramount castle tried to do something crazy. They tried to buy the Warner Bros castle. However, they did not ask nicely. Instead, they tried a “hostile takeover.” This means they tried to force the sale. But Warner Bros said “No.” They rejected the offer immediately.

This is a huge story in Hollywood. It affects the movies you watch. It affects the video games you play. Consequently, everyone is talking about it. In this article, we will explain this big battle. We will look at the 7 big reasons why this happened. We will keep it simple. And we will see who might win this media war.

The Unexpected Attack

First, let’s look at the surprise attack. Paramount wants to get bigger. They think that being bigger will help them win. Therefore, they offered a lot of money to buy Warner Bros Discovery. They made a “bid.” A bid is like a price tag you offer at a store. However, Warner Bros did not like the price. The leaders at Warner Bros looked at the number. They thought it was too low. The believe their company is worth much more. They own HBO. The own CNN. They own the DC Universe. Consequently, they felt insulted.

David Zaslav is the boss of Warner Bros. He is a very tough businessman. It told Paramount to go away. He said the company is not for sale. At least, not for that price. This was a strong move. It showed that Warner Bros is confident. They think they can fix their own problems. They do not need Paramount to save them. Therefore, the first battle ended quickly. Paramount knocked on the door. Warner Bros slammed it shut.

What is a “Hostile Takeover”?

Second, we need to learn a new term. You might wonder, “What is a hostile takeover?” It sounds like a war. And it is a kind of business war. Usually, when one company buys another, they agree. The bosses shake hands. They sign papers. Everyone is happy. However, a hostile takeover is different. In this case, the buyer (Paramount) ignores the boss (David Zaslav). Instead, they go directly to the owners. The owners are the people who have “stock” or “shares.” These are tiny pieces of the company. Paramount says to the owners, “We will pay you cash for your shares right now.”

If enough owners say “Yes,” Paramount takes control. They can fire the old boss. They can take over the building. This is why it is called “hostile.” It is aggressive. It is forceful. Warner Bros does not want this to happen. Therefore, they are fighting back. They are telling their owners, “Do not sell! We are worth more than they say.” It is a high-stakes game. And the winner takes everything.

The Battle of the Streaming Apps

Third, let’s talk about your TV apps. Both companies have streaming apps. Warner Bros has Max. This is where you watch Game of Thrones or Superman. Paramount has Paramount+. This is where you watch Star Trek or Paw Patrol. Paramount wanted to combine these apps. They thought one giant app would be better. It would compete with Netflix. It would compete with Disney+. However, Warner Bros thinks Max is already doing well. Max is making money. It has millions of subscribers. On the other hand, Paramount+ has struggled in the past. It costs a lot of money to run.

Therefore, Warner Bros did not want the headache. Merging two apps is very hard. You have to fix the computer code. You have to change the prices. Customers get confused. Warner Bros decided it was too risky. They want to focus on making Max better. They do not want to worry about fixing Paramount+. Consequently, the deal did not make sense for their technology team.

The Problem with Too Much Debt

Fourth, we must look at the bank accounts. Both companies have a big problem. That problem is “debt.” Debt is money you owe to the bank. It is like a giant credit card bill. Warner Bros already has a lot of debt. They owe billions of dollars. However, they are working hard to pay it off. They are saving money. They are cutting costs. Paramount also has debt. If they merged, the new company would have a mountain of debt. It would be a “super-debt.” Investors are scared of this.

If a company has too much debt, it cannot make new movies. It cannot build new theme parks. All the money goes to the bank. Therefore, Warner Bros said it was unsafe. They did not want to carry Paramount’s heavy backpack. They already have their own backpack to carry. This financial fear was a big reason for the rejection. David Zaslav wants a healthy company. He does not want a company that is drowning in bills.

Clash of the Cultures

Fifth, companies are like families. Each company has a “culture.” This is how they act. This is how they make decisions. Warner Bros is very serious right now. They are focused on saving money. They are canceling movies that are not good enough. Paramount is different. They have a different style. Combining two families is hard. Imagine if you had to move in with your neighbors. You might fight over the remote control. You might fight over dinner. Experts say this merger would be messy. There would be arguments about which movies to make.

• Should we make another Batman?
• Or should we make another Transformers?

Usually, when big studios merge, people lose jobs. Writers get fired. Actors get confused. Warner Bros has already gone through a merger recently. They merged with Discovery a few years ago. That was very painful. It took a long time to fix. Therefore, they are tired. They do not want another chaotic year. The want stability. They want peace. A hostile takeover destroys peace.

The Government Police (Antitrust)

Sixth, there are rules about monopolies. The government watches big companies. They have a group called the “antitrust” division. This group stops companies from getting too powerful. If Warner Bros and Paramount combined, they would be huge. They would own too many movie theaters. The would own too many TV channels. They would own CBS, CNN, HBO, and MTV. That is a lot of power for one company. Consequently, the government might say “No.” The government could sue them. They could block the deal.

Warner Bros knows this. They know the government is strict right now. Why spend billions of dollars if the government will stop you? It is a waste of time. It is a waste of money. Therefore, Warner Bros used this as an excuse. They said, “The government will never allow this.” It is a smart defense. It scares the investors away from the deal. By rejecting the bid, they avoid a long fight with Washington D.C.

What Happens Next?

Finally, what is the future? The fight is not over yet. Paramount might try again. They might offer more money. Or, they might look for a different partner. Maybe they will call someone else. However, Warner Bros is standing firm. They are using a strategy called the “Poison Pill.” This is a special rule. Its makes it very expensive for a hostile buyer to take over. It protects the company. It acts like a shield.

Old studios like Warner Bros and Paramount are nervous. They need to survive. Therefore, we might see more fights like this. Maybe Warner Bros will buy a smaller company. Maybe they will sell a piece of themselves. But for today, the answer is clear. Warner Bros is independent. They are betting on themselves. They are betting on Batman. And they are betting that they can win without SpongeBob’s help.

To sum it up, this was a clash of titans. Paramount tried to be aggressive. They tried a hostile takeover. But Warner Bros Discovery rejected them.

• They did not like the price.
• They worried about the debt.
• They feared the government rules.
• And they wanted to protect their own app, Max.

Consequently, the deal is dead. At least for now. This shows that money cannot buy everything. You also need agreement. You need a good plan. The movie business is tough. Everyone is fighting for your attention. Warner Bros wants to fight alone. They believe they are strong enough. We will watch closely to see if they are right. Grab your popcorn. The real drama is not in the movies. It is in the boardroom.

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