Netflix Amends Warner Bros. Deal to All Cash in Bidding War

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1:20Bloomberg Audio Studios. Podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Well, Netflix, back in the news today, they're amending their offer for Warner Brothers Discovery to an all cash deal. It was cash and stock now going all cash. Believing that that will strengthen their bid. They've also got earnings there for the close here. So a lot to talk about on the Netflix front, which means we want to check in with Geeta Ranganathan.

2:01She covers all the media stocks for Bloomberg Intelligence. She's based down in Princeton here. So, Geeta, what did you make of Netflix today kind of amending their offer to an all cash offer? Yeah, so this really, Paul, puts to rest this ongoing investor debate about whether, you know, the Paramount$30 all cash bid for all of Warner is really, in fact, superior to Netflix's bid, which is a combination of both stock and cash, especially since the value of Netflix's stock has been declining now for many months. So I think what Netflix really aims to do here is to, first of all, to show David Zaslav and Warner Brothers Discovery shareholders the money.

2:42So they're going all cash, you know, and they're basically saying that we want to really get this deal on a fast track here because this will speed up the shareholder vote. It will now happen sometime in April. It was previously supposed to happen sometime in June. So they're really kind of getting going here and, you know, putting the money where their mouth is, you know. You know, first thing, when I saw this news this morning, Geetha, I put my own banker hat back on. I said, boy, it seems like Netflix is bidding against itself because we haven't heard any kind of counter bid from Paramount here.

3:13What do you think is going on behind the scenes with both of these bidders? Yes. So, you know, Paramount, obviously, they've been constantly insisting, you know, about the superiority of that$30 all cash offer with Netflix having having changed its bid to an all cash bid. I think the ball is now squarely in Paramount's court. They have to have to increase or sweeten their bid. And, you know, one of the things, Paul, that has been constantly debated is the value of the TV networks. That is the remaining portion of the business that Netflix will not acquire. So this will be spun off by Warner Brothers Discovery.

3:50Paramount has argued that those TV networks are actually worth nothing. That's what they've said. And they've based our argument just, you know, kind of on the performance and the valuation of Versant, which is the Comcast cable network spin off. But Discovery actually put out a filing today, and it basically suggests that, of course, there's a huge range for those cable TV networks, but they value them anywhere from about$1.50 a share to as high as$7 a share. And they kind of lay out many different scenarios, basically suggesting that, you know, some of those networks, like a CNN, like some networks, international networks in Poland, could actually be sold.

4:29And, you know, a lot more shareholder value could be extracted, so to speak. So I think Warner Brothers still believes that the spinoff of the cable networks will actually bring it more value. And this is why they're kind of leaning towards that Netflix offer. What's the timing here? Do we wait until the shareholder vote until April or do we expect something to happen? It seems to be dragging along here a little bit. Yeah, it is. So actually, tomorrow is a very important day. And I say that because tomorrow is the deadline for the Paramount tender, which is the$30 tender. So expect something to happen.

5:05Either Paramount extends that offer or they basically have to sweeten the bid. So something definitely should have happened tomorrow. If nothing happens, then we'll have to wait and watch and see, you know, what happens now on the regulatory front. Because now that we have all the financial terms in place, I think the next big question mark is obviously what are the regulators going to say about this deal? And what's the early thinking there? so it's a little bit of a mixed bag here and it's going to be really interesting to see what netflix actually does so they've kind of laid out many different arguments which should i i think kind of uh soothe uh regulator fears kind of not have too much of regulatory scrutiny so they've they've said that they're going to maintain the hbo business they're going to maintain the theatrical business these were all big question marks when they initially announced the deal One of the big things that we are kind of looking for tonight when Netflix reports earnings is what their stance is going to be on price increases.

6:00So the last time that they raised prices in the U.S. was last January, so exactly 12 months ago. And typically they have this cadence of increasing prices every 12 to 18 months. So it's going to be interesting to see whether they are going to take that chance and go ahead and raise prices or, in fact, stay away from raising prices. is thus making the case to regulators that they're more pro-consumer and they're kind of, especially when the deal is kind of in regulatory crosshairs. So a lot of things here still kind of waiting to unfold, Paul, but it's going to be a very different process here in the US where it seems like that regulators might give Netflix a green signal, but I think it's going to be much tougher for them in the EU where they do have much higher antitrust issues.

6:4330 seconds left here, Geetha. The company, Netflix, is reporting after the close here. Aside from this deal flow, what else are you looking for? I think the number one thing that everybody is going to look for is revenue guidance for 2026. And one of the things that the deal, the concern that it raised is, is revenue growth going to slow? Is revenue growth slowing? Is that why they bought Warner? And so anything below 13%, 13 % is the consensus number right now. Anything below 13%, not good for Netflix. Stay with us. More from Bloomberg Intelligence coming up after this. Today's show is brought to you by Vanguard.

7:18To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio.

7:57That's vanguard.com slash audio. All investing and subject to risk, Vanguard Marketing Corporation Distributor. Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now.

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9:05You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Well, the president is on a mission. He is determined to gain control of Greenland, and he has made that his central issue as he makes his way to Davos tomorrow to speak with global leaders. And in doing so, he's breaking all kinds of diplomatic norms, sharing Emmanuel Macron's personal text to him and essentially mocking him. So new things are happening every day.

9:41Let's bring in Henrietta Trays. She's managing partner and director of economic policy at Veda Partners. Henrietta, help us make sense of what is happening here when it comes to Greenland and the president threatening perhaps the EU trade deal that was struck last year. threatening to impose more tariffs, even as we await a Supreme Court ruling on the legality of those tariffs? Yeah, I think you just nailed two of the three reasons we are talking about Greenland. The first one is the U.S.-EU trade deal, as far as I can tell, is dead. The EU was planning to drop its industrial tariffs on U.S. exports to 0 % later on this week.

10:21That's off the table. I think the agreement and the lower 15 % tariffs that were reached last year are probably going to revert back to probably going to revert back to the 20 percent Liberation Day tariffs. So I think that's an acknowledgement that there's no deal on digital services taxation. There's no deal on agriculture issues that have plagued the two sides for 100 years. There are a lot of issues with the US-EU trade deal that just are not going to be resolved. And this is the president's way of sort of circumventing that. And then And finally, as we all await the Supreme Court, it strikes me as plainly obvious that when and if they do strike down the president's tariff authority and the Republican Party and President Trump specifically are materially underwater on their handling of inflation prices and the economy with the American voter base.

11:11They don't have the ability to keep ratcheting up tariffs through other alternatives. So Greenland is actually an excellent replacement for tariffs because it keeps those EU and UK and other NATO allies incredibly focused on the U.S., willing to cater to the president's needs and wants. And they don't have to necessarily hit back with tariffs, which the domestic audience in the United States cannot stomach anymore. And those are the biggest reasons I think we're talking about Greenland right now. Henrietta, how's it playing within the Republican Party these days or just within Washington, this whole focus on Greenland?

11:46It seemed to come out of nowhere and the president's not letting it go. Are there political ramifications? This is an election year. You know, I've watched polling data and I've worked on elections from Texas to Rhode Island for 20 years now. I have never seen the American public so unified in opposition to a single item. I don't think this many Americans like like ice cream or Disney World. You know, it's something like eighty to eighty three percent of Americans oppose this Greenland move. That's a striking amount of unanimity and a pretty clear message to the president. What does he do with that, though?

12:21What does Congress do with that? What does the Republican Party do with that unified opposition to Greenland, to the U.S. taking control of Greenland? Well, I think it really. Yeah, I think it really speaks to the next phase of President Trump's political status in the United States, which is that we're moving into lame duck territory. I think we're already there. So what that means is you're not going to get out of Congress this year that will advance the president's agenda. That's not abnormal. Very few presidents pass two reconciliation bills. Joe Biden was definitely an outlier in that regard.

12:53And he got two bipartisan bills done. I don't think that's an option for this president, you know, in this sort of scorched earth environment. So what presidents do in that scenario is they pivot to foreign policy. And that's what the president has been focused on for many months now, whether it is, you know, Israel, Gaza or Venezuela and now Greenland. And that's where lame duck presidents traditionally head to at the end of their terms. So I know we have three years left of President Trump, but the legislative realities, particularly as we look forward to a midterm election cycle where Democrats are leading in the generic ballot, which is highly predictive of election outcomes by five points on average.

13:31So the president is migrating into what is a very normal place for presidents to move into in their last couple of years in office, which is foreign policy. I seem to have something in the back of my mind. You know, I spent the last week on a beach. How about the government staying open? where are we in that oh we got some really good news on that front um the house is moving forward with the six remaining bills even the very contentious homeland security package and i'm very hopeful that they'll be able to clear the rule later on and get that sort of big package of six appropriations bills over the senate by the time they get back next week and we can avert a shutdown so i think we're um on the right path with that one but there's no resolution on health care, right?

14:12Republicans have not come up with a way to make or keep health care plans affordable for Americans who do rely on the Obamacare exchanges. No, there's no solution to the ACA subsidies. And again, I think that goes back to the president having a situation where Congress is not capable of passing legislation. So he pivots to foreign policy in lieu of domestic legislation. So an ACA subsidy extension, my colleague Spencer Perelman has been on the contrary side of this for many months now, but it's still proving accurate. There's just no way to get past the impasse Republicans have on the Hyde Amendment and abortion legislation, the income caps, the applicability of the ACA subsidies.

14:54There's just not a path forward at this time. The House has acted on a three-year extension, but the Senate's not going to pass that bill. Henry, at about 30 seconds left, should we expect any legislation from this Congress in 2026? I don't think so. My odds of a second reconciliation bill are inordinately low. I'm at 20 percent. And that's really trying to be generous. I don't see a path forward for material legislation this year. It's going to be keep the lights on. More bailouts for farmers, I think, are obviously coming. We'll get 15 billion dollars added in this latest bill. That brings us to a total of 30 billion dollars for farmers.

15:26We're going to try to keep doing that with the highway bill, with the farm bill and those pieces of sort of must pass legislation. Stay with us. More from Bloomberg Intelligence coming up after this.

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16:40You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Over the weekend, Greenland became front and center. Once again, President Trump talking about levying tariffs on some of the European countries that are pushing back on some of the president's moves towards Greenland. Our next guest suggests maybe they should rethink that. Mark Champion, he's a columnist for Bloomberg Opinion. His latest column is entitled Europe Can't Afford a Throwdown Over Greenland.

17:17Mark, thanks so much for joining us here. Why do you write that? How do you think Europe will respond or should respond? Well, I mean, we can see that they are, I mean, so they're right in principle in everything that they say, you know, that they've had enough, that Trump is using trade, you know, for reasons that it really shouldn't be used. He's using it as leverage in order to basically break international law and demand that another country hands over sovereignty over a piece of territory. He has no good reason for doing it. He's given various reasons. They simply don't stand up. The U.S.

17:59can do everything that they need to do in Greenland without having to take it. They already have a treaty that allows them to do anything, more or less. So, you know, the Europeans, the outrage is completely understandable. The difficulty is if they get into a trade war, like French President Emmanuel Macron is suggesting that they fire this so-called trade bazooka that was designed for exactly this sort of purpose, where a foreign country is misusing trade in order to pressure the EU. If they do that, as Trump has already known, then he will escalate. If they escalate, they need to think of where they get to and whether they will be able to stay together and whether they will be able to resist.

18:54And the real problem here and the point that I was trying to make is these things are ultimately not determined by principle, but by power. And Europe lacks the power. Trump has that leverage, not necessarily because of trade. If it was just about trade, the EU could, you know, probably stand its own. The real problem is that they are so dependent in terms of security. They care about NATO. They care desperately about NATO. He does not. You know, they care very much about what happens in Ukraine and that Ukraine should, you know, that the Russian force needs to be stopped in Ukraine and not allowed to go further west.

19:31He does not. So this is where they have a real problem. And you point out that you're already seeing a splintering in that European defense or that rallying of European nations. Italy, notably, did not send anyone to Greenland to fight this kind of symbolic or to put up a symbolic defense against the U.S.'s goals for that island. How are you thinking of this divide and conquer strategy that the U.S. is employing? Or is it it's not really much of one? All it has to do is kind of poke holes. Well, that's it. And if there is, you know, if there is a kind of diabolical logic to what Trump is doing, I suspect that this is it.

20:14He's very much on the record is believing that the or saying that the EU is designed to rip off the United States. He'd like to see it dissolved. And trade is an area where one of the few areas where the EU is truly united in terms of its foreign international presence. So, you know, the power to make trade treaties and trade policy is concentrated in Brussels, not in the capitals. So, you know, he he would like to break that down. It's much easier to deal with the UK or France or Germany or Denmark individually for the US than it is to deal with them all collectively. So, you know, you can see a kind of logic to what he might be trying to do.

21:07But again, if he is, you cannot maintain an alliance that way. And unfortunately, the real risk for the Europeans is that they are not ready to give up that alliance. They still depend too much on the U.S. nuclear umbrella, too much on NATO, you know, U.S. assets within NATO to have a kind of, you know, meaningful deterrent against fully militarized countries such as Russia or China. And it's going to be, you know, they're 10 years away, at least, from being able to stand on their own in that sense. And that gives Trump a great deal of leverage in the short term. This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts.

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