Paramount-Warner Bros. merger is seen as a "strong competitor to Netflix"

Investing.com — In a report to clients on Friday, Deutsche Bank stated that Warner Bros. Discovery’s merger with Paramount Sky would create a powerful global streaming giant. Previously, Warner announced that its board considers Paramount Sky’s $31 per share acquisition offer to be a better proposal.

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Analyst Bryan Kraft raised Warner Bros. Discovery’s target price to $31 but downgraded the rating to Hold, citing “limited upside potential.”

Kraft wrote that the proposal from Paramount Sky “is a better offer compared to Netflix’s current bid of $27.75 per share to acquire Warner’s streaming and film assets.”

According to Deutsche Bank, Netflix decided not to match the higher bid and chose to withdraw from the deal, which was not surprising, as Warner and Paramount Sky are likely to reach an agreement in the end.

The report cites CNBC, reporting that Netflix co-CEO Ted Sarandos visited the White House to discuss the proposed deal.

Deutsche Bank said it previously believed that “Mr. Sarandos’s meeting… could influence whether Netflix would actually raise its bid.” The bank added that it is currently unclear whether this meeting affected Netflix’s final decision.

Deutsche Bank believes that the combined Paramount Sky-Warner Bros. Discovery “will become a strong competitor to Netflix in the U.S. market and has the capacity to realize its global growth ambitions.”

The analyst added that the merged company will possess “all the content and intellectual property needed for large-scale success,” and that the deal should be able to “pass regulatory scrutiny with minimal resistance.”

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