Warner Bros Revives Paramount Takeover Talks After Netflix Waiver
Warner Bros Discovery is momentarily re-engaging in acquisition discussions with Skydance-owned Paramount to ascertain the firm’s “best and final” proposal, all the while maintaining its support for the studio and streaming agreement established with Netflix. In a regulatory filing on Tuesday, Warner disclosed that it had obtained a waiver from Netflix to reinitiate discussions with Paramount for a duration of seven days, concluding on Monday. Warner indicated that this will enable the companies to address outstanding “deficiencies” and “clarify certain terms” of Paramount’s most recent offer. However, Warner’s board continues to advocate for shareholder approval of its proposed merger with Netflix. A special meeting has been arranged for Friday, March 20, to conduct a vote on the proposed deal. In a statement, Netflix expressed confidence that its proposed transaction “provides superior value and certainty” – while acknowledging “the ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY’s antics.” The streaming giant indicated that it had provided Warner with a seven-day waiver to “finally resolve this matter.” Warner’s leadership has likewise reaffirmed its backing for the Netflix agreement. In the interim, Paramount characterized the actions taken by Warner’s board on Tuesday as “unusual,” asserting that the company could have assessed the superiority of Paramount’s offer without imposing a timed deadline. Paramount stated it was “nonetheless prepared to engage in good faith and constructive discussions.” Paramount stated that it will persist in its tender offer set at $30 per share, which it asserted was superior to Netflix’s proposal, while simultaneously engaging in a proxy fight. The dynamics surrounding Warner Bros. Discovery are intricate, as Netflix and Paramount pursue divergent objectives.
In December, Netflix reached an agreement to acquire Warner’s studio and streaming business for $72 billion, structured as an all-cash transaction that encompasses its legacy television and film production divisions, in addition to HBO Max. The enterprise value of the transaction, inclusive of debt, stands at approximately $83 billion, translating to $27.75 per share. This agreement is set to be finalized following Warner’s completion of its previously announced separation of cable operations. In contrast to Netflix, Paramount is pursuing a comprehensive acquisition of Warner’s entire enterprise, which encompasses networks such as CNN and Discovery. The company has approached shareholders directly with a hostile all-cash offer amounting to $77.9 billion, mere days following the announcement of the Netflix transaction. The enterprise value of Paramount’s bid is presently approximately $108 billion, inclusive of debt, translating to $30 per share. Warner revealed on Tuesday that a representative from Paramount had separately communicated to the company that it would increase its offer to US 31 per share “pending engagement”. Analysts expressed that they had “long believed” Paramount was inclined to increase its offer “and now it seems we are finally moving in that direction.” If Paramount were to increase its price to $32 or $33 per share, it was noted that it would become “increasingly difficult to argue the Netflix agreement is superior,” although Netflix could subsequently move to match the bid. Netflix remains in a position of leadership, yet it must now substantiate its stance,” the analysts noted in a Tuesday research report.
Paramount has undertaken additional efforts to enhance its proposal in recent times. Last week, the company announced that it would compensate Warner shareholders with an additional “ticking fee” should its deal fail to materialize by year-end—specifically, 25 cents per share, translating to a total of $650 million for each quarter following December 31. Paramount has committed to financing Warner’s suggested $2.8 billion termination payment to Netflix as stipulated in its merger agreement. The company has been actively seeking to enhance its shareholder backing. Paramount has prolonged its tender offer on three occasions, with the most recent deadline established for March 2. Company disclosures indicate that over 42.3 million Warner shares were “validly tendered and not withdrawn” from its hostile bid at the beginning of last week, a decline from more than 168.5 million Warner shares on January 21. This figure remains a minor portion of Warner’s total 2.48 billion shares outstanding in series A common stock. Last week publicly voiced its opposition to Warner’s proposed merger with Netflix. In addition to its tender offer, Paramount has committed to initiating a proxy fight.
On Tuesday, the company reaffirmed its intention to propose its own slate of directors at Warner’s forthcoming annual meeting. The implications of the forthcoming seven days of discussions remain uncertain. Paramount, Warner, and Netflix have engaged in a vigorous exchange over the relative strength of their respective deals in recent months. The potential sale of Warner to either company has generated significant antitrust apprehensions among lawmakers globally, prompting calls for regulators to meticulously examine a merger of this magnitude. The US Department of Justice has commenced its evaluations, and additional nations may likewise examine either agreement. Paramount and Netflix have announced that they obtained securities clearance from German authorities in the previous month. Shares of Warner Bros. Discovery experienced an increase of over 3 percent during trading on Tuesday. Paramount Skydance experienced an increase of over 5 percent, whereas Netflix’s stock saw a modest uptick.
