M+E Daily

By Paul Sweeting

Netflix’s board of directors on Monday otherwise known as a poison pill, in a bid to stave off a potential raid on the company by billionaire investor Carl Icahn.

The plan, which the board approved unanimously on Nov . 2, would be triggered if an “activist investor” acquired 10% of the company, or if a an institutional investor acquired 20%. Last week, Icahn revealed in an SEC filing that he has acquired 9.98% of Netflix’s shares, putting him just under the 10% threshold. Should it be triggered, the plan would flood the market with new, preferred shares, making it more difficult and expensive for Icahn or anyone else to gain control of the company.

In a statement, the company said the plan “is intended to protect Netflix and its stockholders from efforts to obtain control of Netflix that the Board of Directors determines are not in the best interests of Netflix and its stockholders, and to enable all stockholders to realize the long-term value of their investment in Netflix. The Rights Plan is not intended to interfere with any merger, tender or exchange offer or other business combination approved by the Board of Directors.”

The adoption of an anti-takeover poison pill is standard operating procedure for a company under assault by an activist shareholder and the move by Netflix was expected. What to expect now, however, is harder to gauge.

While Icahn has not yet publicly criticized Netflix’s management, he has made it clear in interviews that he thinks management should hand a “For Sale” sign on the company, and has even name-checked several potential buyers, including Microsoft, Google, Verizon and Amazon. Bernstein Research analyst Carlos Kirjner floats Apple as a possibility, because, why not? Whether any of those companies share Icahn’s view of Netflix, however, is far from certain.

Microsoft has already stated emphatically that it is not interested in acquiring Netflix. And it’s not at all clear that any other technology company would be interested, either. Insofar as a platform provider like Microsoft, Google or Apple would be interested in a subscription streaming service it would be because it could add value to its platform and devices, not because they’re interested in the subscription streaming business per se. But it would only add value if the service were proprietary to the platform. So why pay a premium for Netflix when you would only end up having to cut off a chunk of its current subscribers in order to realize its strategic value. It would be far cheaper to build your own content services — as in fact most of them are.

Btt if not a technology company, who might be interested in buying Netflix? BTIG Research analyst Rich Greenfield makes an intriguing case  for someone already in the cable programming business, such as Time Warner, or even Comcast, now that it controls NBC Universal.

“Let’s call Netflix what it is today: a premium cable network entering the third stage of its evolution (stage 1 is distributing other people’s old content, stage 2 is distributing other people’s new content and stage 3 is creating your own new content), which just so happens to be distributed via broadband (OTT, over-the-top) and which is trying to expand its network internationally,” Greenfield last week. “In turn, we believe companies that are experts at creating and distributing content should have an interest in acquiring Netflix.”

My own pick, based on no sourcing or inside information, would be Viacom. It’s Nickelodeon and MTV networks are suffering severe ratings slides as their core audiences shift to other platforms and Viacom needs to do something strategic if it doesn’t want simply to write off those audiences. At the same time, exclusive access to MTV, Nickelodeon and Comedy Central content could make a solid foundation for a compelling, over-the-top streaming service. Viacom’s leverage with cable operators might also gain Netflix a spot on some cable systems, expanding its distribution.

If no buyer emerges for Netflix, however, that poison pill is likely to come into play as Icahn looks for a payoff.