The Warner Bros. Discovery struggle has become more of a dramatic turn as activist investor, the Ancora Holdings, publicly criticizes the proposed deal between Netflix-Warner Bros and advocates the Paramount rival bid instead. Ancora is also putting money into it, having already invested close to $200 million in Warner Bros. Discovery, which makes it very clear that it is not a passive investment. The company feels that the shareholders are being requested to accept less than what a better option is presenting.

This is one of the power struggles that have happened in Hollywood, yet this one seems to have a more significant effect. WBD, which has some of the most well-known entertainment brands in the world, including Game of Thrones, Harry Potter, and DC Comics franchises like Batman are at the middle of a bidding battle. Both Netflix and Paramount find a strategic value of acquiring the legendary studio and its streaming services and investments are now split as to which course of action will be more likely to have a long-term stable and a financial upside.

Ancora Holdings, the manager of some 11 billion dollars worth of assets, has declared that it intends to cast its vote against the Netflix deal at the next shareholder meeting that is anticipated in April unless the board of directors changes its suggestion. The activist investor has not been implicit about criticism. The presently offered Netflix-WBD acquisition requires shareholders to take substandard value, take a gamble on an unsure spinoff and bear considerable regulatory danger, even though a superior value and a more prominent offer of $30 a share is offered by Paramount, the company stated at its site.

This is the essence of what Ancora's argument is all about. On its part, the Netflix acquisition undervalues the Warner Bros. Discovery and subjects the shareholders to regulatory challenges that might complicate or even collapse the acquisition. The acquisition is said to be worth 27.75 each share of the Warner Bros., which is about 82.7 billion dollars including debt. In comparison, the offer made by Paramount is 30 per share with an estimated value of the company of 108.4 billion (persons debt). Even a few dollars per share in negotiations between mergers of such magnitude can be turned into a billions of consideration.

Warner Bros. Discovery now has a market capitalization of about 68 billion, which means that the value of the stake in the company constitutes less than 1 percent of the outstanding shares. Although they are not very big in percentage size, activist investors tend to have more influence than their size suggests particularly when they manage to position the debate on the basis of shareholder value and governance practices. The vocal minority shareholders have been able in the past to petition boards to rethink or renegotiate deals in these past corporate battles across industries.

Ancora has also complained that the board at Warner Bros. was not in full engagement with Paramount Skydance on its rival proposal of the entire company including cable assets like CNN and TNT. To a large number of investors, cable networks are still cash cows despite the streaming transforming the entertainment business. The implication that, the board could have not explored all the strategic options in detail casts doubt not only on price but also on process.

On its part, Paramount has been working harder to capture the shareholders of Warner Bros. The company then added extra sweetening to its deal by giving out more cash amounting to about 650 million as a bonus to the deal each quarter in which the deal is not ended after this year. Paramount also accepted to cover the $2.8 billion breakup fee that would accrue to Netflix in case it ended their contract with Warner Bros. Although this valuation increase was not applied to the headline of Paramount, this financial buffers indicate readiness to take risks and assure investors who are afraid of long-term regulatory delays.

One of the most important aspects of a massive media merger is regulatory approval. Over the last few years, the practice of consolidation within the entertainment industry has been a subject of growing concern among the authorities of the United States, specifically in the context of streaming supremacy and domination over enormous content reservoirs. The mention of the mention of the regulatory risk by Ancora gives us the impression that a Netflix takeover of the studios and streaming business of Warner Bros. may undergo scrutiny by antitrust regulators more than what had occurred with the Paramount acquisition. It is yet to be determined whether the evaluation is correct or not, but perception can affect shareholder sentiment in a deal of such scale.

Warner Bros. Discovery has reacted with reservations. The company stated that it is determined to add value to shareholders to the maximum. It is worth noting that even though it accepted to seek the revised offer by Paramount it has not amended its recommendation in favor of the Netflix deal. Such situations are usually a fine balancing act that boards are faced with; whether to focus on the short term financial gains or the long term strategic fit.

Strategically, the two bidders have strong stories. With an already established streaming service, Netflix would have gained an even more content vault and could have made its competitive moat even stronger against its competitors Disney and Amazon. Instead, Paramount has the potential to merge its studio business with that of Warner Bros. to form a more diversified and spread-out entertainment enterprise including theatrical releases, cable networks, and streaming.

It is remarkable as a person who has been tracking the mergers of the media throughout the last decade that streaming has become a consolidation story rather than a growth story. A couple of years ago, studios were competing to open their own platforms. At this point, it is about scale, survival and shareholder returns. Investors have become more disciplined and require more certain profitability trends instead of increasing subscribers by all means.

It is probable that the next few months will not only define the future of Warner Bros. Discovery, but also indicate the future of the media industry in general. When the shareholders would support Ancora and Paramount, then it would embolden the activist investors to become more influential in the strategies of consolidation. In case the Netflix acquisition succeeds, it would increase the power of existing streaming giants to overtake traditional studios.

In the case of shareholders, it all depends on valuation, certainty and trust in regulatory approval. Paramount is more expensive per share and provides more financial protection, where Netflix gives the company the strategic positioning with an already strong streaming platform. Every course of action brings a possibility and threat.