Kamal Ghorui
Netflix has revised its proposed acquisition of Warner Bros. Discovery, shifting to an all-cash transaction valued at USD 27.75 per share. The move aims at simplifying the deal structure and strengthening its position amid rival takeover efforts.The revised offer values Warner Bros. Discovery at an enterprise value of about USD 82.7 billion, including debt and replaces Netflix’s earlier cash-and-stock proposal. Netflix and Warner Bros. said on Tuesday that the amended structure is intended to provide greater certainty of value to shareholders and accelerate the path to a shareholder vote, according to Reuters. Under the revised agreement, Warner Bros. Discovery shareholders will receive USD 27.75 per share in cash. In addition, they will retain exposure to Discovery Global, a planned spin-off that will house television assets such as CNN, TNT Sports and the Discovery+ streaming service. Both companies said their boards have unanimously approved the amended all-cash deal.Netflix has been locked in a takeover tussle with Paramount Skydance, which has pursued a rival bid for Warner Bros. and last week escalated its efforts by announcing plans to nominate its own slate of directors ahead of the next shareholder meeting. Paramount has argued that its offer is superior, but Warner Bros. has repeatedly rejected that claim.Explaining the rationale behind the revised offer, Netflix co-CEO Ted Sarandos said that the new structure would help move the deal forward faster.“Our revised all-cash agreement will enable an expedited timeline to a stockholder vote and provide greater financial certainty,” Sarandos said in a statement.Netflix’s move comes without increasing the overall valuation of the deal, in what analysts see as an attempt to shut the door on Paramount’s competing bid. The earlier offer comprised USD 23.25 in cash and USD 4.50 in Netflix stock, a structure that came under pressure after Netflix shares fell nearly 15 per cent since the merger announcement in early December.In a regulatory filing, Warner Bros. said that the revised terms offer shareholders immediate liquidity and reduced risk. “The merger consideration is a fixed cash amount to be paid by an investment-grade company, providing stockholders with certainty of value and liquidity immediately upon closing,” the company said.Warner Bros. also disclosed details of its valuation for Discovery Global, which shareholders will own separately following the split. Advisers estimated a wide valuation range for the spinoff, from as low as USD 1.33 per share to as high as USD 6.86 per share, depending on future deal activity. Paramount has dismissed the spinoff’s value, calling it effectively worthless.Market reaction was mixed. Netflix shares rose about 1.2–1.3 per cent before the opening bell, while Warner Bros Discovery shares were little changed. Paramount shares slipped around 1 per cent.The competing bids are expected to come to a head later this year when Warner Bros. shareholders vote on the proposed transaction. Paramount Skydance’s tender offer, which expires on January 21, has so far failed to win board support. A Delaware court recently rejected Paramount’s attempt to force faster disclosures related to Warner Bros.’ cable TV assets.Analysts say that the shareholder approval may only be the first hurdle, as lawmakers across the political spectrum have raised concerns that further consolidation in the media industry could reduce competition and consumer choice. Nonetheless, Netflix has argued that its larger scale, investment-grade credit rating and lower leverage profile make its offer more attractive than Paramount’s.With control of Warner Bros.’ prized studios, streaming assets and franchises such as Game of Thrones, Harry Potter and DC Comics at stake, the battle for the Hollywood giant is shaping up to be one of the most closely watched media deals of the year.
