00:00We say it's a key U.S. antitrust hurdle. Walk us through it.
00:04Yeah, I mean, it really is a key hurdle and very good for them for this shareholder vote.
00:08So when companies decide to merge, they have to file under the Hart-Scott-Rodino Act with the government.
00:13HSR is what it's called. We've all heard about it.
00:16And that starts a mandatory waiting period by which they can't close the deal.
00:20They need clearance from HSR in order to be free, at least in the U.S., to close the deal.
00:25And that happened really fast with this Paramount-Warner Brothers combination.
00:28And in my mind, a little bit surprisingly fast, to be honest.
00:33But the thing that Paramount hasn't said is that they aren't free to close the deal, given what happened in
00:38the U.S.
00:39They still need merger clearance from the U.K. and Europe and possibly other jurisdictions as well.
00:44And that's going to take a lot longer.
00:46And, of course, they still need Netflix, right?
00:50They need an agreement.
00:52They need an agreement.
00:53But what is this saying about how the regulators feel about the Netflix deal?
00:59If they stay with Netflix, how would the DOJ react, like, in light of what we've learned now?
01:04Well, let me start by saying what this says about what the DOJ thinks about the Paramount combination.
01:09Yeah.
01:09Because, honestly, there's no way they investigated this at all.
01:12Seriously.
01:12This was so fast, given the way these processes usually work.
01:16The companies were supplied with what's called a second request, which is an investigation.
01:20It's questions.
01:21And they're looking for data and documents.
01:23These things usually take about four months to respond to.
01:26They did this in about six weeks.
01:28And that means they dumped a lot of documents fast on the Department of Justice.
01:31This February 9th is when they finished it.
01:34And now they have approval 10 days later.
01:36There's no way the Department of Justice got through all those documents and did a real investigation.
01:41So we understand that they're perfectly happy with that combination.
01:44The Netflix side of it is what you asked about, I think, will be a tougher road.
01:49Now, they've already filed HSR as well.
01:51Right.
01:51They received second requests in January, mid-January.
01:55So they're working on those now.
01:56And as I said, in normal circumstances, they take about four months to do.
02:01So they're in the middle of that now.
02:03At the end of that is when the Department of Justice then makes its move.
02:07It can either clear the deal, as it did here.
02:10It can clear the deal with a remedy, which I think, if it were to be cleared, would be more
02:14likely.
02:15Right.
02:15Or it could sue to block the deal.
02:17God, a million questions.
02:18I do want to point out that Netflix did respond to Paramount today.
02:23And here's what they said.
02:24Paramount Skydance continues to mislead stockholders and distract from the facts.
02:29This is from Netflix Chief Legal Officer David Hyman in a statement that was put out today.
02:34Goes on to say, the facts are that routine HSR milestones do not signal DOJ approval,
02:41nor that any decision has been made.
02:44They have not secured approvals, needed to close, and they are a long way from doing so.
02:49So, Jen.
02:50That's a little disingenuous, too.
02:52So tell me why.
02:53Why?
02:53Because the DOJ never, HSR clearance is never an approval of a deal.
02:59The Department of Justice doesn't approve deals.
03:01It's just a hurdle, right?
03:02It just steps out of the way.
03:04Yeah.
03:04What the law says is that HSR allows the DOJ to investigate and possibly try to block a deal.
03:09If they let that period lapse, they've decided to step out of the way and do nothing.
03:13But it's not an approval.
03:15But in the U.S., it does clear a deal to close.
03:18It only means that any time, even 10 years from now, the Department of Justice could still
03:23come back and try to break up the company, try to reverse what it did.
03:27And we've seen that already with the FTC, with Instagram and WhatsApp, trying to force them
03:31to sell those companies.
03:32All right.
03:33I'm just going to say, I know I'm not supposed to do this, but I'm kind of tired of this
03:36story.
03:36Just do the deal.
03:37But Chris Palmieri, you have been covering it, all the twists and turns.
03:41Bloomberg News, senior editor and entertainment team leader.
03:43He's been out there listening to us.
03:45He's out in our L.A. Bureau.
03:47Top of mind for you, because it just seems like we're going to get more back and forth.
03:51And there's at least a clock still ticking that there's still more regulatory stuff to
03:55go here.
03:57Oh, definitely a lot more regulatory stuff to go.
03:59And I should note, we broke the news just an hour or so ago that Netflix co-CEO Ted Sarandos
04:06sent a letter to Mike Lee, the Republican senator who's called the hearings this month on this
04:11deal.
04:11He was very sharply critical of director James Cameron, the most successful director in film
04:17history, Titanic, Avatar.
04:18He said, James Cameron's got it all wrong.
04:20We're going to support theaters with this Warner Brothers deal.
04:24Cameron himself had been very critical of the merger.
04:27So that was a big surprise.
04:29And it shows how vigorously, really, Netflix is pursuing this.
04:33Well, so what are you expecting, Chris, as you kind of watch every day, every week,
04:39there's something here?
04:40Like, what do you think is the next shoe to drop here?
04:44Well, we'll hear on Monday whether Paramount has upped its offer and able to come to a deal
04:51with Warner Brothers again that would require Netflix to then weigh in and match that offer.
04:58So a lot of drama just coming in a few days.
05:01And Jen, is it fair to say, just going back to this antitrust hurdle for a second, that
05:05the DOJ fast-tracked their decision?
05:10And if so, why?
05:12Was there, is it fair to say that maybe there was some political influence?
05:17Of course, we know that the Ellisons are very close with the Trump administration.
05:21I think you can say it.
05:22I feel like for so long, everybody's been saying that there's been a relationship that
05:25maybe favored a deal.
05:27And I completely agree with you.
05:28I think we can probably assume that.
05:30But when it's a hostile takeover, the timeline is faster.
05:33So it looks fast-tracked, but it is also because it's a hostile tender offer situation
05:38and not a standard merger.
05:40The timeline is faster.
05:41But what normally happens with the DOJ is that they always ask for more time beyond what
05:46they're statutorily given.
05:47And in this case, they were statutorily given 10 days after the companies complied, which
05:52was February 9th.
05:53And they went ahead and issued, I guess it's a decision by clearing HSR, where I had expected
05:59them to ask for more time, just simply to be able to get through the documents, to look
06:03at it, to even be able to save face, to say we did a thorough investigation.
06:07Chris, I want to get back to you in a moment.
06:08But Jen, I want to ask you, so that does Netflix have some ground to say, wait a minute, this
06:13wasn't a fair review?
06:14Like, is there another litigate?
06:17Or no, they're not going to touch that.
06:19You know, Netflix doesn't really.
06:20I mean, they can say that.
06:22There isn't very much that they can do.
06:23Can shareholders come back?
06:25Well, the only way to do anything about the HSR clearance, and it wouldn't be ripe yet,
06:31would be to try to go to court to block a closing.
06:34But they can't close, right?
06:36Because they still need antitrust approvals in other jurisdictions.
06:40So if it gets to the point where they get these clearances, and there are consumers or
06:44state AGs, possibly, that have issue with the way the investigations were undertaken in
06:50the U.S., they can go to court and they can ask a judge for a restraining order or a
06:53preliminary
06:54injunction to stop a closing.
06:55Chris, come on back in.
06:56Because, you know, I thought, silly me, Warner Brothers signed an agreement with Netflix
07:01to sell it.
07:02And the studio and the streaming business, $72 billion.
07:05So, I mean, that is still out there, right?
07:09Oh, for sure.
07:10They're the only company that has a deal right now.
07:13But it's contingent on a few things.
07:14One is shareholder approval, which there's going to be a vote March 20th.
07:19And also regulatory approval.
07:21And either one of those things could go awry.
07:23And what are you watching next for?
07:26Because there are a couple things coming in the next few days.
07:29Is that right?
07:31A potential bidding war next week.
07:33We'll see.
07:34I mean, Paramount said, you know, $30 all cash was where it was at for several months.
07:39And then said last week, $31 maybe.
07:43And everyone sort of expects them to maybe even go higher if they're going to steal this
07:47away from Netflix.
07:48So that's what we're watching.
07:50And then what Netflix does in response.
07:51Credit.
07:52Credit.
07:53Chris, there will be a lot of debt credit or whatever.
07:56But Chris, why is this so complicated?
08:01Is it really, I tease that this can really kind of set the future of Hollywood.
08:05I mean, this is going to be a big deal no matter which way it goes down.
08:09But why is it?
08:10Do both of these, Netflix and Paramount, really need this company?
08:15I would argue no.
08:17They certainly acting like they do.
08:19But, you know, Warner Brothers has had sort of a tortured history of corporate ownership
08:23over the last 20 years or so.
08:25AOL, AT&T, the Discovery merger obviously didn't go very well because that's why it's
08:31for sale now.
08:32So it's amazing that everybody wants this asset.
08:35But, you know, it's Hollywood.
08:38You know, Oscars, they've got two movies.
08:41Probably one of them is going to win Best Picture this year.
08:44So, you know, everyone wants a little part of that.
08:47Price goes up because of results.
08:49Chris, what's the likelihood we would see Netflix upping its bid?
08:54Ted Sorrento, I think he was on CNBC a few days ago kind of dodging the question of like
08:58we're not.
08:59He was on Bloomberg too.
09:00He was on Bloomberg too.
09:01This week, yeah.
09:02Kind of dodging the question, though.
09:03He doesn't want to, you know, I get it.
09:05They're in a hostile takeover kind of situation.
09:08But what's your insight?
09:10I would say, I mean, he just doesn't want to give up his hand right now if he doesn't
09:15have to.
09:16But just given all of the, you know, the TV appearances, podcast appearances, letters
09:23taking on James Cameron, he certainly, by all indication, is all in for now.
09:29Jen, saving 30 seconds for you as you kind of continue to watch this, what's top of mind
09:34for you or what might next come in terms of legal issues?
09:37Well, just to see what happens with this bidding war, to see who ends up with the deal.
09:40And then if it's Paramount, we're just going to be watching UK and Europe.
09:44If it's Netflix, we're going to watch what happens with the DOJ once they get through
09:47their investigation.
09:48Is Europe likely to have more of a problem with one deal over another?
09:51I think probably Netflix, just because Netflix is really big in a lot of the member countries.
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