Netflix Inc. (NASDAQ: NFLX) is reported to be contemplating a significant shift in the terms of its proposed acquisition of Warner Bros. Discovery (NASDAQ: WBD), moving toward an all-cash offer to complete the $82.7 billion transaction. Sources familiar with the discussions, as reported by the Financial Times, indicate that this proposed adjustment aims to provide Warner Bros. Discovery shareholders with a more straightforward and expedited deal structure. However, these discussions are ongoing, and the final terms may yet be altered.
The strategic reconsideration arises as Netflix faces increased pressure from Paramount Skydance (NASDAQ: PSKY), which has mounted a hostile bid for Warner Bros. Discovery. Paramount's offer exceeds Netflix's initial valuation for WBD, placing the two companies in a competitive stalemate over control of one of the entertainment industry's most valuable portfolios.
Under the original arrangement, Netflix's offer valued the studio and streaming assets of Warner Bros. Discovery at $27.75 per share, which included a $4.50 per share component payable in Netflix stock. Contrasting this, Paramount, under the leadership of David Ellison, has tabled a $30 per share bid paid entirely in cash. This higher valuation includes Warner Bros. Discovery's cable television operations and CNN division.
Paramount has not only issued a superior financial proposal but also initiated a proxy contest aimed at restructuring Warner Bros. Discovery's board of directors. This aggressive approach attempts to wrest control by rallying shareholder support behind the Paramount bid.
Alongside its enhanced offer, Paramount has filed a lawsuit demanding greater financial transparency from Warner Bros. Discovery. Paramount posits that without access to detailed financial documentation, shareholders are unable to adequately evaluate the merits of its proposal. Ellison has repeatedly criticized Warner Bros. Discovery's board for refusing to engage in negotiations regarding the terms of the Paramount offer, although he maintains openness to "constructive discussions" with the existing leadership.
The negotiation timeline places Netflix's initial agreement early in December, shortly preceding Paramount's announcement of its $108 billion bid for the entirety of Warner Bros. Discovery, inclusive of its cable television segment, directly to shareholders. Warner Bros. Discovery, owner of HBO studios and various other entertainment assets, has officially rejected Paramount's bids on two occasions, signaling resistance to the hostile takeover attempt.
The market's response to these developments was evident on Tuesday, with Warner Bros. Discovery's stock climbing 1.6% following Bloomberg News' report on Netflix's potential to revise its deal terms toward an all-cash structure. This reaction suggests investor favorability toward a simpler, cash-based transaction that might streamline the acquisition process.
Despite this positive response toward Netflix's strategic reconsideration of its offer, the streaming giant has experienced significant share price volatility since announcing its pursuit of Warner Bros. Discovery in October, with its stock value declining by over 25% during this period. On the same Tuesday, Netflix's shares closed up 1%, reflecting some stabilization amid the takeover saga.
The battle for Warner Bros. Discovery thus continues with significant corporate maneuvering, legal actions, and shareholder engagement strategies from all parties involved. Netflix's proposed shift to an all-cash offer may represent a tactical adaptation designed to maintain its position as a leading contender while addressing shareholder desire for a straightforward transaction.
As negotiations develop further, the dynamics of this high-stakes acquisition will remain closely watched by investors and industry analysts, given the substantial market impact and the strategic realignment it represents in the media and streaming sectors.