New offer could ‘reasonably be expected’ to lead to better deal for shareholders than Netflix bid, HBO owner says
Paramount has taken a step forward in its attempt to buy Warner Bros Discovery, after the HBO owner said that the latest offer from David Ellison’s company could be superior to Netflix’s bid.
WBD’s board has admitted that Paramount’s $31-per-share offer - up from the previous $30-per-share bid - could “reasonably be expected” to lead to a better deal for shareholders, adding that talks with the David Ellison-led company would be ongoing.
Paramount said on Tuesday evening that it welcomed the board’s determination and provided further details on its latest bid, which first emerged earlier this week.
The revised offer for the entirety of WBD includes a “ticking fee” equal to 25 cents per quarter that kicks in after September 30 until the transaction closes; a $7bn “regulatory termination fee” payable by Paramount should the transaction not close due to regulatory matters (raised from $5.8bn previously); and paying the $2.8bn termination fee that WBD would owe to Netflix should it terminate the existing agreement.
Paramount also reaffirmed it will eliminate WBD’s potential $1.5bn financing cost associated with its debt exchange offer; agreed to an obligation to contribute additional equity funding needed to support the solvency certificate required by Paramount’s lenders; and agreed to a “Company Material Adverse Effect” definition that excludes the performance of WBD’s cable TV business.
The offer followed a seven-day period of discussions between Paramount and WBD, which ended on 19 February, prior to which the Ellison camp had submitted their bid.
“The Board has not made a determination as to whether the revised [Paramount] proposal is superior to the merger with Netflix,” WBD said.
“WBD will engage further with PSKY to determine if a proposal that constitutes a ‘Company Superior Proposal’, as defined in the Netflix Merger Agreement, can be reached.”
If that happens, Netflix would have four business days to negotiate with WBD and to propose any revisions to its existing $27.75-per-share offer. It could make an improved bid before that.
The board continues to recommend Netflix’s proposal to shareholders, who will meet on March 20 to vote on the matter.
However Tuesday’s development has changed the game and Netflix will be on high alert after a busy press tour in which co-chief exec Ted Sarandos has repeatedly expressed confidence in his company’s bid.
“Paramount welcomes the WBD Board’s determination and looks forward to continuing to engage constructively with WBD to deliver the benefits of Paramount’s proposal to WBD shareholders, the creative community and consumers,” Paramount said.
The Netflix deal for Warner Bros’ streaming and studios business is valued at $82.7bn, while Paramount’s most recent offer for the entire WBD has been valued at $108.4bn.
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