Netflix Restructures Warner Bros. Discovery Bid to All-Cash Offer Enhancing Deal Certainty

Netflix has updated its acquisition proposal for Warner Bros. Discovery, transforming the initially proposed $72 billion offer—previously encompassing both cash and stock components—into a fully cash-based transaction.

Originally, Netflix put forward a proposal combining cash with equity, valuing Warner Bros. shares at $27.75 each, which corresponded to an enterprise valuation of approximately $82.7 billion including Warner Bros.' debt obligations. The revised agreement eliminates the stock component, offering a simplified, all-cash deal to Warner Bros. shareholders.

Representatives from both companies issued a joint statement highlighting the benefits of the revised structure. They noted that this alteration not only clarifies the deal but also fosters increased confidence in the assuredness of its valuation for Warner Bros. Discovery equity holders. Additionally, the modification is expected to accelerate the timeline towards securing shareholder approval.

Despite the shift to a completely cash-based proposal, the per-share value remains unchanged at $27.75. Moreover, shareholders of Warner Bros. will be eligible to gain added value through shares of Discovery Global, which will be separated from Warner Bros. as an independent publicly traded entity prior to closing the Netflix acquisition.

Warner Bros. has announced plans to divest Discovery Global, creating two separate publicly listed companies—a process anticipated to conclude within six to nine months before the Netflix deal's finalization. The overall acquisition by Netflix anticipates completion within 12 to 18 months following the initial merger agreement.

Ted Sarandos, Netflix's co-chief executive, elaborated on the strategic rationale, emphasizing that the combination is projected to expand consumer choices globally and offer enhanced access to premium television and film content across streaming platforms and theatrical releases. He further indicated that the merged entity would likely lead to substantial increases in U.S. production resources and foster growth in original content investment, thereby bolstering job creation and supporting sustainable industry development.

Both corporations’ boards have sanctioned the amended all-cash offer, reinforcing formal commitment to the revised transaction.

The acquisition contest remains fierce, as Netflix faces opposition from Paramount Skydance, which recently intensified its hostile takeover approach. Paramount proposed appointing its own slate of directors ahead of Warner Bros.' upcoming shareholder meeting, underscoring the competitive nature of the bidding process.

Paramount has also initiated legal proceedings in Delaware Chancery Court, requesting an order compelling Warner Bros. to disclose how it assesses and compares its offer against Netflix's competing bid to inform shareholders adequately. While Warner Bros.' management has repeatedly dismissed Paramount’s overtures, advising shareholders to favor the Netflix transaction, Paramount has pursued efforts to enhance the allure of its $77.9 billion hostile offer.

Following these developments, Netflix’s stock experienced a 1.3% uptick prior to market opening, whereas shares of Warner Bros. Discovery registered a slight decline.

In summary, the shift to an all-cash offer by Netflix serves to streamline the acquisition process for Warner Bros. Discovery amid ongoing competitive rivalry and corporate restructuring initiatives, with significant implications for content production and distribution sectors.