Paramount Pictures has taken significant steps to strengthen its hostile bid for Warner Bros. Discovery (WBD), intensifying its strategy to interrupt WBD's impending sale of its studios and streaming operations to Netflix. On Tuesday, Paramount announced enhanced financial terms intended to provide tangible benefits to WBD shareholders and address regulatory uncertainties linked to the pending merger between WBD and Netflix.
Under the revised offer, led by Paramount's chairman David Ellison, the company commits to disbursing approximately $650 million each quarter to Warner Bros. Discovery shareholders starting in 2027 if the Netflix acquisition has not been finalized by then. This quarterly payment mechanism is designed to compensate shareholders for any delays or failure in closing the Netflix transaction, effectively acting as a financial safety net linked to the status of the merger.
In addition to these quarterly payments, Paramount has pledged a full and prompt payment of the $2.8 billion termination fee that Warner Bros. Discovery would be obligated to pay Netflix should the deal between the two companies be terminated. This commitment seeks to remove one of the key financial risks facing WBD shareholders in entertaining Paramount’s offer, by absorbing costs that would otherwise fall upon them if the Netflix deal were to collapse due to Paramount's rival bid.
The announcement follows Netflix’s efforts to streamline and finalize its approximately $83 billion acquisition of WBD’s studios and streaming assets. The latest development from Paramount arrives shortly after Netflix converted its offer into an all-cash deal, while WBD plans to separate its remaining cable networks, including CNN, into a standalone entity called Discovery Global.
Notably, Paramount did not increase its existing all-cash offer of $30 per share for the entire WBD company, which encompasses CNN, but referred to its added provisions as “enhancements.” According to Ellison, these enhancements are intended to give Warner Bros. Discovery shareholders clarity regarding their investment's value, outline a straightforward pathway through regulatory scrutiny, and provide safeguards against fluctuations in the broader market. WBD’s stock price responded positively, opening approximately 1% higher following the announcement.
Despite these developments, there is limited indication that Paramount's enhanced offer is resonating sufficiently with WBD shareholders. Warner Bros. Discovery has recently asserted that more than 93% of its shareholders have rejected Paramount's bid, characterizing it as an inferior alternative to the Netflix transaction. WBD shareholders are scheduled to convene for a special meeting either in late March or early April, during which these competing offers and related company strategies are expected to be evaluated.
Netflix’s Countermeasures and Regulatory Considerations
As Paramount advances its hostile takeover bid, Netflix has simultaneously stepped up a public relations campaign aimed at discrediting Paramount's proposal. Clete Willems, Netflix’s chief global affairs officer, articulated concerns during a Fox Business Network interview about job security, stating that Paramount's claimed $6 billion in merger synergies effectively equates to $6 billion in layoffs. This comment highlights Netflix’s position that Paramount's offer may be detrimental to workforce stability within the combined entities.
Additionally, Willems addressed pending scrutiny of Netflix's business conduct by the Department of Justice—a matter initially disclosed by a financial news outlet. He characterized such government reviews as routine and typical in the context of significant mergers and acquisitions, suggesting that the antitrust examination is not unusual and should not derail the ongoing acquisition process.
Overall, the acquisition landscape remains dynamic, with Paramount’s augmented offer serving as a tactical maneuver to disrupt Netflix’s closing plans, while Netflix continues to defend its bid and the strategic direction of the transaction amid regulatory and shareholder challenges.