Netflix is reportedly preparing a new all-cash offer to acquire Warner Bros. Discovery’s streaming and studio businesses, as detailed in a recent Wall Street Journal report. This shift follows a previous proposal where Warner Bros. Discovery (WBD) shareholders were set to receive $23.25 in cash and $4.50 worth of Netflix common stock for each share of WBD common stock outstanding, collectively valuing the deal at approximately $82.7 billion.
The intention to move to an all-cash proposal suggests Netflix is adapting its strategy in response to competitive pressures and market conditions. Bloomberg News had hinted at this potential pivot, signifying a notable change in Netflix’s approach to the transaction.
While representatives from Netflix declined to comment on the matter, a spokesperson from WBD directed inquiries back to Netflix, reflecting the heightened interest and stakes involved in this potential acquisition.
This development unfolds against a backdrop of competition from Paramount Skydance, led by David Ellison. Paramount has been vocally advocating for its own $30/share all-cash hostile bid, asserting that it presents a more advantageous proposition for shareholders compared to Netflix’s offer. Recently, Paramount has intensified its efforts by filing a lawsuit to compel WBD to disclose financial specifics regarding the Netflix proposal, particularly regarding the valuation of a spin-off of its Discovery Global cable TV networks. Paramount has also announced plans for a proxy fight to nominate its own board candidates at WBD’s upcoming annual shareholder meeting.
The stock performance of Netflix has also been notable since the initial announcement of the Warner Bros. deal on December 5, with shares dropping over 12%. This decline has resulted in Netflix’s stock falling below the “collar” set in the original agreement, which could potentially reduce the total value of the acquisition. As of Tuesday, Netflix shares closed at $90.32, reflecting a slight uptick of 1% on the day.
Paramount’s evaluation of the Netflix transaction has suggested that the effective value for WBD shareholders may be as low as $27.42/share owing to Netflix’s declining stock price. Moreover, Paramount has voiced skepticism regarding the valuation of Discovery Global, arguing that its shares might hold no value, particularly in light of recent analyses.
Should the deal proceed, Netflix aims to acquire a range of significant assets, including the Warner Bros. film and television studios, HBO and HBO Max, as well as WBD’s games division. The initial proposal included substantial debt financing from several major banks, including Wells Fargo, BNP, and HSBC.
In contrast, Paramount Skydance is pushing to acquire Warner Bros. Discovery in its entirety, bolstered by influential backing from prominent figures within the investment world, including Larry Ellison and entities such as RedBird Capital Partners, as well as sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi. The evolving landscape of this acquisition saga underscores the competitive nature of the streaming and entertainment industry as firms jockey for strategic advantages and shareholder support.
