Netflix makes all-cash $82.7 billion bid for Warner Bros, blocks Paramount

Netflix has switched to an all-cash offer for Warner Bros Discovery's studio and streaming assets but without increasing the $82.7 billion price in a bid to shut the door on Paramount's rival efforts to snag the Hollywood giant.

 

The new all-cash bid - at $27.75 a share - has unanimous support from the HBO owner's board, according to a Tuesday regulatory filing.

 

Both Netflix, opens new tab and Paramount Skydance, opens new tab covet Warner Bros (WBD.O), opens new tab for its leading film and television studios, extensive content library and major franchises such as "Game of Thrones," "Harry Potter" and DC Comics' superheroes "Batman" and "Superman."

 

Paramount has altered its terms and engaged in an aggressive media campaign to try to convince shareholders that its bid is superior, but Warner Bros has spurned the David Ellison-led company.

 

"Our revised all-cash agreement will enable an expedited timeline to a stockholder vote and provide greater financial certainty," Netflix co-CEO Ted Sarandos said in a statement.

 

Shares of Netflix, which is slated to report quarterly earnings after the market close, were up 1.2 per cent before the bell. Paramount shares were down 1 per cent , while Warner Bros was little changed.

EARLIER CASH-AND-STOCK BID REPLACED

Netflix shares have fallen almost 15 per cent since announcing the merger on December 5, closing at $88 per share on Friday – well below the $97.91 floor price of the original bid. That drop was part of Paramount's argument that its bid was superior.

 

The new $27.75-per-share offer from Netflix replaces its earlier cash-and-stock bid for $23.25 in cash and $4.50 in Netflix stock.

 

"The merger consideration is a fixed cash amount to be paid by an investment-grade company, providing (Warner Bros) stockholders with certainty of value and liquidity immediately upon closing the merger," Warner Bros said.

 

The company's board also disclosed its valuation for Discovery Global, a planned spin-off that will contain television assets including CNN and TNT Sports and the Discovery+ streaming service.

 

The board has maintained that the Netflix merger deal is superior to Paramount Skydance's $30-per-share cash bid for the company because Warner Bros' investors would retain a stake in the separately traded Discovery Global.

 

Warner Bros' advisers used three separate approaches for valuing Discovery Global. The lowest share price they arrived at was $1.33 per share, by applying a single value across the whole company. The high end of the range they determined was a price of $6.86 a share, if the spin-off became involved in a future deal.

 

Paramount has said the cable spinoff central to the streaming giant's offer is effectively worthless.

PARAMOUNT TENDER EXPIRES JAN 21

The rival bidder went to court on January 12 to expedite the disclosure of this information, so investors could evaluate the competing offers for Warner Bros. A Delaware court judge rejected the request, finding that Paramount had failed to demonstrate it would suffer irreparable harm from the alleged inadequate disclosures about Warner Bros' cable TV business.

 

Paramount Skydance, whose tender offer expires on January 21, did not immediately respond to a Reuters request for comment.

 

"Paramount will make another appeal to shareholders. Unless Paramount raises its bid, the appeal will be window dressing," Emarketer analyst Ross Benes said.

 

The race is expected to come to a head at a shareholder vote later this year as Warner investors weigh the value of cable assets.