Warner Bros. considers reviving sale discussions with Paramount
Warner Bros Discovery Inc. is contemplating the possibility of resuming sale discussions with competitor Hollywood studio Paramount Skydance Corp. following the receipt of its adversarial suitor’s latest revised proposal, according to sources. According to sources, members of the Warner Bros. board are contemplating whether Paramount might present an opportunity for a more advantageous deal, a strategy that could potentially spark a renewed bidding war with Netflix Inc. The board has yet to determine its response and maintains a binding agreement with Netflix, according to individuals who requested anonymity while discussing confidential information. Last week, Paramount submitted revised terms that responded to various concerns. The company is prepared to cover a $2.8 billion fee owed to Netflix should Warner Bros. decide to terminate their agreement, and is also offering to support a Warner Bros. debt refinancing. Paramount also stated it will compensate Warner Bros. shareholders if the deal doesn’t close by Dec. 31, highlighting its confidence that the deal will receive swift regulatory approval.
Warner Bros. continues to express reservations regarding Paramount’s offer, many of which have been articulated in previous statements. However, this marks the first occasion on which the board has contemplated that Paramount’s proposal might result in a more favorable deal or encourage Netflix to increase its bid. It has also encountered pressure from shareholders to at least initiate discussions with Paramount. Warner Bros. has reached an agreement to sell its namesake studio and HBO Max streaming business to Netflix in a deal valued at $27.75 per share. Warner Bros. is swiftly moving to conduct a shareholder vote regarding its agreement with Netflix, while Paramount, which owns CBS and MTV, is directly appealing to Warner Bros. shareholders with a $30-a-share tender offer and is actively lobbying regulators for approval of its deal.
Both Paramount and streaming leader Netflix have expressed their readiness to increase their offers to finalize a deal for Warner Bros., one of the largest media companies in the United States. Paramount Chief Executive Officer David Ellison has stated that the current offer is not his last and final bid, while Netflix’s leadership has informed shareholders that they could also increase their offer. Both companies exercise caution in their spending practices. Shares of Netflix have fallen over 40 percent from their peak in June as investors express concerns regarding the Warner Bros. deal. Chris Marangi, co-chief investment officer at Gabelli Funds, expressed a slight disappointment that Paramount did not increase its offering price this week. However, he noted that the recent adjustments to the terms indicate the company is discovering “ways to be creative about structuring a deal.” Marangi stated “Like the Warner Bros. board, I want to see a sweetened offer.”
If Warner Bros. chooses to re-engage with Paramount, it must first inform Netflix. Warner Bros. subsequently sought to persuade Paramount to raise its bid above $30 per share. If Warner Bros. determined that Paramount’s new offer was superior, Netflix would retain the right to match it. Last year, Paramount initiated the auction of Warner Bros. by making an unsolicited offer. The company raised its prices multiple times before ultimately succumbing to Netflix. Paramount leadership has maintained that its deal is superior and has dedicated the past few months to persuading regulators and shareholders. A group of Warner Bros. shareholders, such as Pentwater Capital Management and Ancora Holdings Group, has expressed their view that the board ought to initiate discussions with Paramount. However, only 42.3 million shares were tendered to Paramount at the latest count, representing less than 2 percent of the total outstanding shares.
