Paramount Skydance has submitted a revised acquisition bid for Warner Bros. Discovery, confirmed by both companies. This move comes as Paramount seeks to counter Netflix’s previous agreement to acquire the famed Hollywood studio.
The new proposal surpasses Paramount’s earlier bid of $30 per share in cash, totaling approximately $108.4 billion when accounting for debt. While specific details of the latest offer remain undisclosed, it reflects a response to concerns raised by the Warner board regarding previous proposals.
Discussions between the two companies led to Paramount’s bid, as Warner Bros had initially favored Netflix’s offer of $27.75 per share for its studio and streaming assets. In a statement, Warner Bros reiterated its support for the Netflix deal, which remains under consideration.
In light of Warner Bros’ waiver granted under its merger agreement with Netflix, Paramount was allowed to engage in discussions, although Netflix retains the right to match any higher offer. A delay in Netflix’s response has yet to be noted.
Market reactions on the day concluded with Netflix shares rising by 2%, while Warner Bros experienced a 0.8% increase and Paramount saw a slight decline. Analysts from MoffettNathanson suggested that an offer around $34 per share from Paramount could effectively conclude the bidding overture.
Netflix’s position includes a deal for Warner Bros’ film and television studio and its streaming service, HBO Max, while excluding the cable television networks which will be part of the separately traded entity, Discovery Global. This spinoff is anticipated to enhance shareholder value, potentially surpassing Paramount’s earlier offer.
According to the merger agreement established in December, if Warner Bros decides that Paramount’s new offer is more favorable than Netflix’s, the latter will have four days to respond with a matching bid.
The outcome of this bidding war holds significant implications for the entertainment industry, potentially reshaping the hierarchy by granting control of some of Hollywood’s most prized assets, including iconic franchises such as “Game of Thrones” and “Harry Potter.”
With substantial cash reserves, Netflix has the ability to enhance its bid for Warner Bros, asserting that its offer provides superior value due to the proposed spinoff of the cable assets. In contrast, Paramount argues that these cable assets hold limited value.
Paramount, under CEO David Ellison, remains adamant that it has a clearer path to securing regulatory approval in the U.S. In a bid to bolster investor confidence, the company has agreed to absorb the $2.8 billion breakup fee Warner Bros would incur should the Netflix deal collapse. Furthermore, Paramount has committed to paying an additional $650 million for each quarter the acquisition remains incomplete after this year.
As the Warner board evaluates Paramount’s new proposal, the company has heightened its outreach efforts to Warner Bros investors, urging them to oppose the Netflix deal at an upcoming special meeting. Should Warner Bros reject the latest bid, Paramount has indicated readiness to challenge its board in the next annual meeting, potentially nominating candidates from major shareholders, including Matthew Halbower of Pentwater Capital Management.
Amid these developments, Ancora Holdings, a smaller stakeholder in Warner Bros, has also intensified its pressure on the company, criticizing its lack of engagement with Paramount on the matter. A shareholder vote regarding the Netflix deal is scheduled for March 20, further adding to the urgency of the situation.