In an attempt to win over the shareholders of the Hollywood behemoth for its $72 billion merger and possibly avert a hostile bid from Paramount, which is owned by Skydance, Netflix is now making an all-cash offer to purchase Warner Bros. Discovery’s studio and streaming division.
Netflix’s entire enterprise value, including debt, is $82.7 billion after it reached a cash and stock agreement with Warner back in December for $27.75 per share.
However, the firms stated on Tuesday that they would be making changes to the deal in order to streamline its structure, give Warner owners greater assurance of value, and expedite the process of a shareholder vote, which they indicated might happen by April.
Each Warner share in the all-cash deal is still worth $27.75. The additional value of Discovery Global’s shares, which would become a distinct public business after a previously planned split from Warner Bros., will also be distributed to Warner stockholders.
The boards of both Warner and Netflix approved the all-cash deal announced on Tuesday. Warner leadership has consistently supported a merger with Netflix. Warner CEO David Zaslav said in a statement that the updated deal “brings us even closer to combining two of the greatest storytelling companies in the world.”
In contrast to Netflix, Paramount made a $77.9 billion bid to shareholders last month to buy Warner’s entire business, including networks like CNN and Discovery.
To support the Paramount’s deal, which has an enterprise value of $108 billion including debt, Warner shareholders have until Wednesday at 5 p.m. ET to tender their shares.
However, that deadline might be extended. The Wall Street Journal revealed last week that Paramount was considering another extension, even though the business declined to provide more information on Tuesday.
Paramount has committed to a proxy battle in addition to its tender offer. The business announced last week that it would propose its own slate of directors prior to Warner’s upcoming shareholder meeting, which has yet to be scheduled.
Additionally, Paramount filed a lawsuit in Delaware Chancery Court to force Warner Bros. to reveal to shareholders how it views both its bid and Netflix’s rival offer. However, Paramount’s effort to speed up that process was rejected by a judge on Thursday.
Warner praised the court’s ruling and referred to Paramount’s action as “yet another unserious attempt to distract” in a statement at the time.
Warner shareholders “should ask why their Board is working so hard to hide this information,” according to Paramount, which insisted that the decision had nothing to do with the veracity of its claims.
A Warner Bros. Discovery sale might be a protracted process that is almost certain to face intense antitrust scrutiny, regardless of who ultimately prevails. Netflix and Warner insisted on Tuesday that they anticipate closing on a combination 12 to 18 months after their December deal.
However, that timescale may be complicated by Paramount’s aggressive bid. Under President Donald Trump, who has made hitherto unheard-of claims regarding his personal involvement in the outcome of a transaction, politics are also anticipated to play a role.
Concerned about both proposals, trade associations in the media and entertainment sector have warned that further industry consolidation may lead to job losses and less diversity in content, with notably detrimental effects on filmmaking.
The businesses have addressed the issues. Ted Sarandos, co-CEO of Netflix, stated on Tuesday that the merger with Warner “will deliver broader choice and greater value to audiences worldwide,” both at home and in theaters, “driving job creation and long-term industry growth.”
Warner Bros. Discovery and Paramount-Skydance shares marginally decreased on Tuesday morning, while Netflix’s stock increased a little under 1%.
