In a dramatic turn of events, Warner Bros Discovery has briefly reopened takeover discussions with Paramount Global to hear its "best and final" proposal, even as the company moves forward with a previously announced merger agreement with Netflix. This development comes after Warner Bros received a crucial waiver from Netflix, allowing a seven-day window for renewed negotiations with Paramount.
Deadline Looms for Final Offer
According to a regulatory filing submitted on Tuesday, Warner Bros stated that the waiver from Netflix permits talks with Paramount until next Monday. The company emphasized that this period is intended to address any unresolved "deficiencies" and clarify "certain terms" related to Paramount's latest bid. Despite this reopening, Warner's board continues to recommend that shareholders support its proposed merger with Netflix, with a special meeting scheduled for March 20 to vote on the deal.
Netflix Expresses Confidence in Its Proposal
Netflix released a statement expressing confidence that its merger transaction "provides superior value and certainty" for Warner Bros Discovery stockholders. The streaming giant also noted the "ongoing distraction for WBD stockholders and the broader entertainment industry" caused by Paramount's persistent efforts. Netflix hopes the week-long waiver will help Warner "finally resolve this matter" decisively.
Paramount Criticizes Warner's Board Actions
Paramount responded by calling Warner's board actions "unusual," arguing that the company could have evaluated whether Paramount's offer was superior without imposing a strict deadline. Paramount stated it is prepared to engage in "good faith and constructive discussions" and will continue to push its tender offer priced at $30 per share, which it claims is better than Netflix's proposal. Additionally, Paramount is pursuing a proxy fight to gain shareholder support.
Complicated Battle for Warner Bros Assets
The competition between Netflix and Paramount for Warner Bros Discovery has created a complex corporate battle, as each suitor seeks different assets from the media conglomerate.
- Netflix's Proposal: Netflix agreed in December to purchase Warner's studio and streaming business for $72 billion in an all-cash transaction. This deal includes legacy television and movie production products, as well as the streaming platform HBO Max. With debt, the total value reaches approximately $83 billion, or $27.75 per share. The merger would be finalized after Warner completes the previously announced separation of its cable operations.
- Paramount's Bid: Paramount aims to acquire the entire Warner company, including television networks like CNN and Discovery. Shortly after the Netflix deal was announced, Paramount launched an all-cash, $77.9 billion hostile takeover offer to shareholders. The current bid stands at roughly $108 billion with debt, or $30 per share, though Warner has indicated that a Paramount representative suggested a potential increase to $31 per share pending an agreement.
Paramount Sweetens the Deal
In recent efforts to bolster its proposal, Paramount has introduced several incentives. Last week, the company announced it would pay Warner shareholders an additional "ticking fee" of 25 cents per share, totaling $650 million for every quarter after December 31, 2026, if the deal does not close by then. Paramount also pledged $2.8 billion to cover breakup fees associated with terminating Warner's deal with Netflix.
Paramount has been actively working to secure more shareholder support, extending its tender offer three times, with the latest deadline set for March 2. Company disclosures reveal that more than 4.2 million Warner shares have been "validly tendered and not withdrawn" from its takeover bid as of last week, a significant drop from over 168.5 million shares on January 21. Notably, investor Ancora Holdings has publicly opposed Warner's proposed merger with Netflix.
Antitrust Concerns and Regulatory Scrutiny
The potential sale of Warner Bros Discovery to either Netflix or Paramount has raised antitrust concerns among lawmakers, who are urging regulators to closely examine the implications of such a large-scale merger. The U.S. Justice Department has initiated reviews, and other countries may also scrutinize either deal. Both Paramount and Netflix reported receiving security clearance from German authorities last month, indicating some progress in international regulatory approvals.
As the deadline approaches, the entertainment industry watches closely to see which suitor will prevail in this high-stakes corporate showdown, with outcomes potentially reshaping the media landscape for years to come.
