In a strategic shift to fortify its bid for Warner Bros. Discovery (WBD), Netflix has amended its acquisition proposal, now offering an entirely cash-based deal. Announced on Tuesday morning, the revised offer replaces an earlier plan that combined cash with Netflix stock as payment. This alteration arrives approximately six weeks after the initial agreement intended to reshape the entertainment sector through the creation of new corporate entities.
The Netflix proposal targets the planned spin-off of Warner Bros., encompassing the company’s movie studio and streaming services, which is set to become a separately traded public company later this year. Valued at $27.75 per share, this transaction contrasts with the previous structure where a portion of the offer was delivered in Netflix stock, combined with $23.25 per share in cash. The shift toward an all-cash transaction is positioned as a countermeasure in response to Paramount’s ongoing hostile bid for WBD, which offers shareholders $30 per share entirely in cash.
This comprehensive cash deal will be financed through a mixture of Netflix’s existing cash reserves, accessible credit lines, and committed financing arrangements. In the companies’ joint statement, it was explained that this simplified financial structure aims to provide enhanced certainty to WBD shareholders concerning the value of the offer and is poised to expedite the process leading to a shareholder vote on the transaction.
WBD Chief Executive Officer David Zaslav indicated that following the customary regulatory review by the United States Securities and Exchange Commission, a special shareholder meeting will be convened to vote on the transaction. The timeline for this vote is anticipated to occur in the spring, contingent on the successful completion of necessary regulatory procedures.
Meanwhile, Paramount has proceeded with its strategy to acquire WBD shares, continuing to offer $30 per share in cash, a price that exceeds Netflix’s current proposal. Earlier this month, Paramount CEO David Ellison warned of a potential proxy fight, signaling intent to nominate a board slate supportive of Paramount to challenge the existing WBD board.
WBD’s board remains steadfast in its position, endorsing the Netflix deal in conjunction with the formation of Discovery Global, an independent publicly traded company which will house CNN and other non-studio channels currently owned by WBD. Samuel A. Di Piazza, Jr., the chairman of WBD’s board, emphasized that the transition to an all-cash consideration enhances the certainty of value derived from the Netflix combination. He moreover highlighted shareholder opportunities to benefit from management’s strategic plans regarding Discovery Global’s portfolio of brands and international reach.
Conversely, Paramount has contested the valuation of the assets outside the Warner Bros. segment, arguing that channels like CNN possess negligible equity value. Paramount has sought additional information through litigation in Delaware, aiming to clarify the valuation framework so shareholders can make more informed decisions regarding tendering their shares to Paramount’s offer. However, courts have declined expedited handling of these proceedings.
As the contest for control of Warner Bros. Discovery unfolds, Netflix is poised to release its quarterly earnings report following market close on the same day as the announcement of the amended offer. Investors and market participants continue to monitor developments closely as negotiation dynamics evolve amidst regulatory reviews, legal challenges, and shareholder considerations.