Paramount Skydance has announced plans to lay siege to Warner Bros. Discovery in a high boardroom drama that feels like a throwback to the “Barbarians at the Gate” era of the 1980s.
But what share of hostile takeovers actually succeed?
About 24%.
That’s according to two law professors who studied a database of more than 54,000 M&A transactions from 1990-2005 for a paper entitled, “Who Writes the Rules for Hostile Takeovers, and Why? — The Peculiar Divergence of U.S. and U.K. Takeover Regulation.”
The paper — though a few years out of date — suggests that Netflix has the upper hand in the corporate battle. Netflix announced an $82.7 billion deal with WBD to acquire the Warner Bros. film studio and HBO last Friday. Paramount countered on Monday with a direct appeal to Warner Bros. Discovery shareholders, arguing that its $30/share bid for the entire company is a better deal.
“Now that Netflix has been declared the winner, other things being equal, I think they fight to make sure they are the winner,” said David Skeel, a law professor at the University of Pennsylvania who co-authored the paper. “It sure seems like Warner Bros. is really important to both of them.”
Skeel and John Armour, of the University of Oxford, were trying to explain why hostile takeovers are more successful in the U.K., where 43% worked over the same time period. The bottom line, they concluded, was that U.S. law was friendlier to takeover defenses, while British law left the acquisition target more vulnerable.
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“Delaware in particular allows the directors of the target company to defend [against a hostile takeover] in a way they can’t do in England,” Skeel said.
Warner Bros. has yet to deploy a “poison pill,” which would effectively limit the amount of its shares the hostile bidder — Paramount — can acquire. If it did get that far, Paramount would probably go to court to try to disallow it, but would face a high burden.
That’s still a few moves away. First, Paramount is likely to raise its offer for the company. Netflix would then have the opportunity to counter. Netflix also could argue that its deal, which does not include Warner Bros. Discovery’s linear assets, remains superior.
Under Delaware law, Warner Bros. Discovery directors are obliged to make a good-faith effort to get the best deal “reasonably available” to shareholders. But that “reasonable” standard gives the directors a fair bit of leeway to use their judgment.
President Trump remains a wild card, as it is widely assumed that he will seek to use the threat of an antitrust injunction as leverage to influence the outcome. Trump has already extracted $16 million from the previous Paramount regime, in a settlement over a pre-election “60 Minutes” interview with Kamala Harris that Trump objected to, while his administration weighed the Skydance merger. Meanwhile, his son-in-law, Jared Kushner, is among the silent investors in the Paramount Skydance bid for WBD.
Which is to say that past patterns may not mean much.
“I wouldn’t give Paramount an 80% chance, but they definitely have a chance,” Skeel said. “There are a lot of moving parts. It’s been a long time since we’ve had a takeover fight like this one.”
From Variety US