WBD says Paramount’s offer ‘superior’ to Netflix deal

Paramount has taken pole position in the battle for Warner Bros. Discovery, after the latter’s board deemed the David Ellison-led company’s $31-per-share bid for the HBO owner to be a better offer than the deal agreed wiith Netflix.

WBD said that its board, following consultation with independent financial and legal advisors, had determined that Paramount’s most recent bid for the entirety of the company constituted a “superior proposal”, compared to Netflix’s $27.75-per-share offer for its studio and streaming operations.

Earlier this week WBD’s board said that Paramount’s improved offer - up from the previous $30-per-share bid - could “reasonably be expected” to lead to a better deal for shareholders.

The revised offer includes a “ticking fee” equal to 25 cents per quarter that kicks in from 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 an offer to pay 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.

WBD has notified Netflix of its decision and the streamer now has four business days to propose revisions to its offer, with a deadline of 11.59pm on 4 March.

Following the conclusion of this period, WBD would be entitled to terminate the Netflix merger agreement.

Paramount chief exec David Ellison said: “We are pleased WBD’s board has unanimously affirmed the superior value of our offer, which delivers to WBD shareholders superior value, certainty and speed to closing.”

Netflix was yet to respond to the news at time of publication.

Despite WBD’s announcement, the Netflix merger agreement remains in effect at present and its board continues to recommend the streamer’s offer. That will likely change, however, unless Netflix chooses to improve its bid.

WBD had already set a shareholder vote on 20 March to decide the company’s future, following Parmaount’s pursuit of the David Zaslav-led company. 

The decision marks a remarkable reversal in fortunes for David Ellison’s Paramount, which has made almost a dozen approaches for WBD over the past six months.

It had appeared to have lost the battle when Netflix’s $83bn offer was accepted in late December, but an aggressive approach has now seemingly set the Top Gun, Landman and Star Trek owner as frontrunner to take ownership of the Hollywood giant.