Netflix has revised its acquisition proposal for Warner Bros. Discovery (WBD), now offering an all-cash deal rather than a combination of cash and stock. This updated offer, announced on March 15, 2024, comes approximately six weeks after the companies initially struck a significant agreement that has the potential to reshape the entertainment landscape. The move aims to strengthen Netflix’s position against Paramount’s ongoing hostile takeover bid for WBD.
Under the new terms, Netflix proposes to pay $27.75 per WBD share for its movie studio and streaming assets. These assets are expected to be separated into a new publicly traded entity, simply named Warner Bros., later this year. Concurrently, channels owned by WBD, including CNN, will be transferred to a separate company called Discovery Global.
Previously, Netflix’s offer included $23.25 in cash and the remainder in Netflix stock. This structure allowed Paramount to argue that its all-cash proposal was more attractive. In response to the revised Netflix offer, Paramount has been acquiring shares with an offer price of $30 each, intensifying the competition for WBD.
The financial backing for Netflix’s transaction will come from a mix of cash reserves, available credit facilities, and committed financing. The companies emphasized that this all-cash structure simplifies the transaction, providing greater certainty for WBD stockholders and expediting the timeline for a stockholder vote.
Samuel A. Di Piazza, Jr., chair of the WBD board, expressed confidence in the revised proposal, stating, “By transitioning to all-cash consideration, we can now deliver the incredible value of our combination with Netflix at even greater levels of certainty.” Di Piazza highlighted that the new arrangement positions investors favorably as they navigate the strategic plans for Discovery Global’s brand portfolio and global reach.
In contrast, Paramount has been vocal in its criticism of WBD’s valuation of its channels, asserting that they possess minimal equity value. Earlier this month, Paramount’s CEO, David Ellison, initiated a lawsuit in Delaware seeking further information on the valuation process. Ellison suggested that WBD shareholders require comprehensive details to make informed decisions regarding their shares. Nevertheless, a Delaware court denied Paramount’s request for expedited proceedings on the matter.
As the competition heats up, Paramount has also threatened a proxy fight, intending to nominate board members more aligned with its interests to take over WBD’s board. In light of these developments, Netflix’s all-cash offer represents a strategic pivot, potentially altering the dynamics between these major players in the entertainment industry.
Investors and analysts alike will be watching closely as Netflix is scheduled to report its quarterly earnings later today. The outcomes of these negotiations and the market’s response could have significant implications for the future of both companies and the broader media landscape.
