Paramount has officially upped its offer for Warner Bros. Discovery, CNN’s parent company, to $31 per share, prompting WBD’s board to announce an extension of the negotiation period with Paramount regarding a potential deal.
Beyond the increased share price, Paramount sweetened its proposal in other respects too, notably by offering WBD “$7 billion to terminate regulatory contracts” “should the deal fail to close due to regulatory issues.”
Consequently, discussions with Paramount will proceed as WBD seeks to secure the most advantageous agreement possible. Nevertheless, the merger agreement between WBD and Netflix “remains in effect,” the company emphasized, and analysts suggest Netflix is well-positioned to match any rival bid.
Previously, Paramount had proposed $30 per share, which WBD dismissed as “inferior” when contrasted with the company’s planned divestiture of its studio and streaming assets to Netflix. Paramount is pursuing what is termed a hostile takeover, appealing directly to WBD shareholders.
Last week, Netflix granted WBD a seven-day waiver to engage with Paramount, characterizing Paramount’s endeavor as an “ongoing distraction” for the entertainment sector.
From WBD’s perspective, the aim was to ascertain Paramount’s “best and final” offer to provide shareholder clarity on the situation.
On Tuesday morning, the WBD board stated it was “considering” the proposal but withheld specifying the price details.
The situation shifted Tuesday afternoon when the WBD board declared that Paramount’s offer could “reasonably be expected to lead to a ‘company superior proposal,’ as defined in WBD’s merger agreement with Netflix.”
In a sense, this announcement served as a legally worded preview of forthcoming maneuvers, as the WBD board stipulated that it had “not made a determination” as to whether the new $31 per share offer truly constitutes a “superior proposal to the Netflix merger.”
However, if and when the board reaches such a conclusion, Netflix will have a four-day window to submit a counteroffer. Netflix is not precluded, though, from matching Paramount’s bid prior to that official declaration.
Last month, facing pressure from Paramount, Netflix had already adjusted its all-cash offer.
Given the substantial investment Netflix has already made toward securing Warner Bros and HBO, its sudden withdrawal seems improbable, although Netflix Co-CEO Ted Sarandos noted over the past weekend that his company has a “reputation for being willing to walk away and let somebody else overpay for things.”
Netflix also voiced criticism of Paramount’s hostile venture to acquire WBD, asserting that “Paramount’s financial instability and plans for rapid debt reduction pose substantial risks to the entertainment industry.”
The Netflix merger is contingent upon Warner Bros. Discovery’s blueprint to separate into two publicly traded entities this summer.
Once the separation takes effect, the company unit Netflix would acquire would be named Warner Bros., while WBD’s cable networks, including CNN, would form a distinct entity dubbed Discovery Global.
WBD CEO David Zaslav stated in an internal memo Tuesday morning, “Our work on the separation matters and integration planning with Netflix continues, and our priorities as a business remain unchanged.”
WBD will convene a special shareholder meeting on March 20th and intends to recommend a vote in favor of the Netflix deal, which values the studio and streaming assets at $27.75 per share.
Over the weekend, the merger drew fire from former President Donald Trump, who demanded that Netflix dismiss board member Susan Rice or “suffer the consequences.”
In response to inquiries about these remarks, Netflix Co-CEO Ted Sarandos told the BBC that Trump “likes to do a lot of things on social media.” He reiterated that this is fundamentally a “business deal, not a political deal.”
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