Bidding battle escalates: Netflix revises Warner Bros. acquisition; Offers all-cash deals
Netflix has revised its proposed acquisition of Warner Bros. Discovery to an all-cash transaction at a price of US$27.75 per share.
The move is aimed at simplifying the deal structure and strengthening its position amid rival takeover attempts.
The revised offer values Warner Bros.
Discovery at an enterprise value of approximately US$82.7 billion, including debt, and replaces Netflix’s earlier cash-and-stock offer.
According to Reuters, Netflix and Warner Bros.
Netflix and Warner Bros. stated on Tuesday that the revised structure aims to enhance the certainty of value for shareholders and accelerate the approval of a shareholder vote.
Under the amended agreement, Warner Bros.
Discovery shareholders will receive US$27.75 in cash per share. Additionally, they will be in touch with Discovery Global, a planned spinoff that will house television properties such as CNN, TNT Sports and the Discovery+ streaming service.
Both companies said their boards unanimously approved the revised all-cash deal. Netflix is locked in a takeover battle with Paramount Skydance.
which has made a rival bid for Warner Bros. and stepped up its efforts last week by announcing plans to nominate its directors ahead of the next shareholder meeting.
Paramount has argued that its offering is superior, but Warner Bros.
has repeatedly rejected that claim. Explaining the reasoning behind the revised offer, Netflix co-CEO Ted Sarandos said the new structure will help move the deal forward faster.
“Our revised all-cash agreement will enable an accelerated timeline for the shareholder vote and provide greater financial certainty,” Sarandos said in a statement.
Analysts perceive Netflix’s move as an attempt to thwart Paramount’s competing bid, as it does not increase the overall valuation of the deal.
The earlier offer consisted of US$23.25 in cash and US$4.50 in Netflix stock, a structure that came under pressure after Netflix shares fell nearly 15 per cent following the merger announcement in early December.
In a regulatory filing, Warner Bros. said the revised terms provide immediate liquidity and reduced risk to shareholders.
“The merger consideration is a fixed cash amount paid by an investment-grade company, providing shareholders with immediate certainty of value and liquidity upon closing,” the company said. Warner Bros.
Warner Bros. also disclosed the valuation details for Discovery Global.
Warner Bros. also disclosed the valuation details for Discovery Global, which shareholders will own separately after the split.
Advisors have estimated a wide valuation range for the spinoff, ranging from US$1.33 per share to US$6.86 per share, depending on future deal activity.
Paramount has dismissed the value of the spinoff, calling it effectively worthless. Market reaction was mixed.
Before the opening bell, Netflix shares rose about 1.2-1.3 percent, while Warner Bros. Discovery shares showed little change.
Paramount shares slipped nearly 1 per cent. Competing bids are expected to emerge later this year when Warner Bros.
Shareholders vote on the proposed transaction. Paramount Skydance’s tender offer, which expires on January 21, has so far failed to garner the board’s support.
A Delaware court recently rejected Paramount’s attempt to compel faster disclosures related to Warner Bros.’ cable TV property.
Analysts say shareholder approval may be only the first hurdle, as lawmakers across the political spectrum have raised concerns that further consolidation in the media industry could reduce competition and consumer choice.
Nonetheless, Netflix has argued that its larger scale, investment-grade credit rating and lower leverage profile make its offering more attractive than Paramount’s. Under the control of Warner Bros.’
With valuable studios, streaming properties and franchises like Game of Thrones, Harry Potter, and DC Comics at stake, the battle for the Hollywood giant is shaping up to be one of the most-watched media deals of the year.
