Activist Investor Challenges Warner Bros-Netflix Merger Push

Warner Bros. Discovery faces fresh pushback from activist investor Ancora Holdings, which has built a $200 million stake in the company and called on shareholders to reject a proposed partnership with Netflix. The group argues the Netflix deal undervalues Warner Bros. and prefers a merger with important Global. This move comes as media companies scramble to combine forces amid shifting viewer habits and streaming wars.

Background

Warner Bros. Discovery, formed from the 2022 merger of WarnerMedia and Discovery, has struggled with heavy debt and falling ad revenue. Its stock price sits well below the highs seen after the merger, hit hard by cord-cutting and competition from streaming giants like Netflix. Leaders at Warner Bros. have eyed deals to cut costs and boost market share. Talks with Netflix surfaced late last year, aiming for shared sports rights and content bundles to fight rivals. Netflix, the top streaming service with over 280 million subscribers worldwide, wants live sports like NBA games to draw more live viewers. Warner Bros. holds rights to NBA and NHL games through TNT, making it a key piece.

The Netflix plan would see Warner Bros. license its sports content to Netflix while keeping some operations separate. Details remain under wraps, but it promises billions in savings through joint tech and marketing. Shareholders have mixed views, with some seeing it as a lifeline and others fearing loss of control. Enter Ancora Holdings, a Cleveland-based firm known for shaking up company boards. The group targets underperformers, pushes for sales or splits, and has won seats on boards at firms like Norfolk Southern.

Ancora started buying Warner Bros. shares quietly months ago. Its stake now tops $200 million, enough to demand attention at shareholder meetings. The firm sent a letter this week to Warner Bros. CEO David Zaslav and the board, laying out its case. It calls the Netflix tie-up a bad fit that hands too much power to Netflix without fixing core problems like too much debt.

Key Details

Ancora's pitch centers on an alternative: a full merger with important Global. important, owner of CBS, MTV, and important+, has its own troubles, including failed talks with Skydance Media. A Warner-important combo would create a media powerhouse with studios, networks, and streaming services under one roof. It would rival Disney and Comcast in size, combining libraries of movies and shows for better bargaining with cable providers and streamers.

Stake Size and Shareholder Power

Ancora's $200 million holding equals about 0.7% of Warner Bros. shares, small but influential for activists. The firm plans to rally other investors, citing poor returns since the Warner-Discovery merger. Warner Bros. stock has dropped over 70% from its peak, while debt lingers near $40 billion. Ancora demands a special shareholder vote on the Netflix deal and wants the board to explore important talks right away.

"The proposed transaction with Netflix is a half-measure that fails to address Warner Bros. Discovery's fundamental challenges and would lock the company into a disadvantaged partnership," Ancora wrote in its letter to the board. – Ancora Holdings

Warner Bros. has not commented publicly on Ancora's letter. Sources close to the company say executives value shareholder input but stand by the Netflix strategy as the best path forward. Netflix also stayed quiet, focused on its own growth after adding 18 million subscribers last quarter.

important's side adds layers. Its market value has shrunk to around $8 billion, down from highs during the streaming boom. A merger with Warner Bros., valued at roughly $25 billion, would need regulatory nods from the FCC and Justice Department, already scrutinizing media deals. Past blocks, like the AT&T-Time Warner case, show hurdles ahead.

What This Means

This challenge tests Warner Bros. leadership at a turning point. If shareholders side with Ancora, it could derail the Netflix plan and force a important review. A Warner-important deal might wipe out billions in overlapping costs but face antitrust heat over market control in TV and film. Netflix loses a potential sports boost, sticking to its plans for WWE and other live events.

Broader media shifts hang in balance. Companies like Disney and Amazon Prime race to bundle sports, news, and movies. Smaller players like Warner Bros. must pick partners carefully or risk fading. Investor pressure could spark more board changes at Warner Bros., where Zaslav's pay drew fire last year despite flat results.

Wall Street watches closely. Shares of Warner Bros. ticked up 2% after Ancora's letter hit, signaling some see merit in the fight. important stock jumped 5%, betting on merger buzz. Analysts split: some praise Netflix's scale, others favor a bigger merger for survival. Streaming subscribers now top traditional TV viewers in the U.S., pushing all toward consolidation.

Ancora's history gives it edge. The firm ousted leaders at Engine No. 1 and pushed sales at other targets. Its Warner Bros. campaign joins bigger activist plays, like ValueAct's stake last year. If talks stall, expect proxy fights at the annual meeting in May. For now, the Netflix deal sits in limbo, with shareholders holding the cards.