Netflix is gearing up to make a new, all-cash offer to buy Warner Bros. Discovery’s streaming and studio businesses, according to the Wall Street Journal.
Originally, Netflix wanted to pay each Warner Bros. Discovery (WBD) shareholder $23.25 in cash plus $4.50 in Netflix stock for every WBD share.
Netflix revises offer, goes for all-cash
That put the deal at a whopping $82.7 billion. However, Netflix’s plan is now shifting. The company’s reportedly ready to drop the stock part and go with cash only. Bloomberg had already hinted that this was coming, and it appears the Journal has just doubled down on it, citing unnamed sources.
Neither side is saying much, Netflix isn’t commenting, and WBD is sending all questions back to Netflix.
This change comes as David Ellison’s Paramount Skydance keeps pushing to convince shareholders that its own all-cash, $30-per-share bid is the better deal.
On Monday, January 12, Paramount sued WBD, demanding it reveal more financial details about the Netflix offer, especially how it’s valuing the spin-off of Discovery Global’s cable networks.
Paramount also says it’s going to start a proxy fight, planning to nominate its own picks for the WBD board at the next shareholder meeting, candidates who would back the Paramount takeover.
Netflix’s share drops after announcing Warner Bros deal
Since Netflix announced the Warner Bros. deal on December 5, its shares have dropped more than 12%, falling below the “collar” of $97.91 per share set in the agreement.
That means the acquisition’s total value is shrinking. If the price stays low, WBD shareholders would get 0.0460 Netflix shares for each WBD share instead of $4.50 worth of Netflix stock per share. On Tuesday, Netflix closed at $90.32, up slightly for the day.
Paramount’s latest number-crunching says the Netflix offer is now worth about $27.42 per WBD share because of Netflix’s sliding stock price. Paramount Skydance also claims that Discovery Global shares will end up worthless, pointing to the fate of Comcast’s Versant spin-off as an example.
If Netflix’s deal goes through, it will take over the Warner Bros. film and TV studios, HBO and HBO Max, plus WBD’s games division. The original bid included $59 billion in debt financing from Wells Fargo, BNP, and HSBC.
Meanwhile, Paramount Skydance is proposing to buy all of Warner Bros. Discovery outright. David Ellison’s dad, Oracle co-founder Larry Ellison, is backing the effort, along with RedBird Capital Partners and big sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi.
Paramount Skydance sues Warner Bros Discovery
The media giant has moved to Court demanding further information about the Netflix deal worth $82.7 billion which indicates that the stakes have risen extremely high in one of the most high-profile corporate battles in Hollywood.
This action by Paramount Skydance will drive investors to think of its all-cash bid of $108.7 billion as the more intelligent and less complicated option.
According to Reuters, Paramount Skydance will nominate directors to the board of Warner Bros Discovery, an aggressive move which would provide the company with better representation in the future of the studio.
Paramount had also given a letter to shareholders on Monday confirming that it was planning to propose an amendment to the bylaws of Warner Bros Discovery.
Warner Bros Discovery, in its turn, insists that Netflix has global content with a global studio potential that would complement its own portfolio, and therefore, the overall company would have an even greater global presence.
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