Warner reopens a narrow window to revisit Paramount offer
Warner Bros. Discovery said it is briefly restarting takeover discussions with Paramount after receiving a waiver from Netflix that gives the company a limited seven-day period to review Paramount’s latest bid. In a regulatory filing Tuesday, Warner said the Netflix waiver runs until Monday, allowing the companies to discuss unresolved “deficiencies” and to “clarify certain terms” of Paramount’s offer.
The filing also made clear that Warner’s leadership is not stepping back from its recommendation that shareholders support Warner’s proposed merger with Netflix. Warner said it has set a special meeting for Friday, March 20, for a vote on the Netflix deal.
Netflix, which agreed in December to buy Warner’s studio and streaming business for $72 billion in an all-cash transaction, said it was confident in the terms of its proposal. In a statement, Netflix said the transaction “provides superior value and certainty,” while adding that it recognizes the “ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY’s antics,” referring to Paramount’s parent, Paramount Skydance.
Netflix said it granted Warner a seven-day waiver to “finally resolve this matter,” and Warner’s leadership reiterated that it still supports the Netflix agreement. Paramount, however, characterized the move as out of step with the timing of determining whether its offer is better.
Paramount calls the process “unusual” but says it will engage
Paramount said Warner’s board actions were “unusual” and that Warner could have determined whether Paramount’s offer was superior without a timed deadline. Even so, Paramount said it was “nonetheless prepared to engage in good faith and constructive discussions.”
Alongside the talks, Paramount said it would continue moving forward with its hostile approach. The company said it is still advancing its tender offer priced at $30 per share and said it would continue pursuing a proxy fight.
Paramount also said it will nominate its own slate of directors at Warner’s upcoming annual meeting, positioning the contest as both a takeover bid and a change at the board level. The dual track reflects the different strategies of the two bidders: Netflix has a negotiated path to acquire Warner’s studio and streaming business, while Paramount has pushed to buy the entire company, including networks such as CNN and Discovery.
How the two offers differ
Netflix’s deal would cover Warner’s legacy TV and movie production arms, as well as HBO Max, and is structured as an all-cash transaction. The enterprise value of the deal is about $83 billion including debt, which the filing described as about $27.75 per share, and it would be finalized after Warner completes a previously-announced separation of its cable operations.
Paramount’s offer is all-cash and hostile, Warner said, coming “just days after the Netflix deal was announced.” Warner disclosed that Paramount’s enterprise value bid currently stands around $108 billion including debt, or $30 per share. Warner also said a Paramount representative told the company it would raise its offer to $31 per share “pending engagement.”
Analysts at Raymond James said in a Tuesday research note that they had “long believed” Paramount was prepared to raise its offer, adding that it appears “we are finally moving in that direction.” The analysts said if Paramount increases to $32 or $33 per share, it would be “increasingly difficult to argue the Netflix agreement is superior,” while also noting Netflix could then move to match the bid.
“Best and final” talks after prior bid moves
Warner’s filing described the talks as focused on Paramount’s latest offer and on the “deficiencies” it still wants addressed, including clarifying certain terms. What happens after the weeklong discussions remains uncertain, as Paramount, Warner and Netflix have spent the last couple of months contesting which agreement is stronger.
Paramount has made additional efforts to win support recently, including a “ticking fee” proposal described as a $0.25 per share added payment tied to whether its deal closes by the end of the year. Paramount has also said it would fund Warner’s proposed $2.8 billion breakup payout to Netflix under their merger agreement.
In the tender offer process, Paramount has extended the offer three times, with the latest deadline set for March 2. Warner’s disclosures said that more than 42.3 million shares had been “validly tendered and not withdrawn” as of the start of last week, down from more than 168.5 million shares on Jan. 21. Warner’s filing cited that number against its roughly 2.48 billion shares outstanding in series A common stock.
Warner’s merger vote is also occurring amid shareholder pressure. Warner said one activist investor, Ancora Holdings, publicly expressed opposition to the proposed merger with Netflix. Paramount, meanwhile, has reiterated its plans for a proxy fight as part of its bid strategy.
Regulators and antitrust concerns on both potential deals
The prospect of a Warner sale to either bidder has drawn attention from lawmakers and regulators internationally, with concerns centered on the scale of the potential combinations. The filing said the U.S. Department of Justice has initiated reviews and that other countries may also scrutinize either transaction. Both Paramount and Netflix have said they received securities clearance from German authorities last month.
In Tuesday trading, Warner shares rose more than 3%, Paramount Skydance gained more than 5%, and Netflix’s stock inched up slightly.