Netflix has intensified its efforts in the competitive landscape for Warner Bros. Discovery (WBD) by revising its takeover bid to a completely cash-based offer. This change comes as a response to a hostile bid from Paramount.
On Tuesday morning, Netflix revealed its willingness to purchase Warner Bros. and HBO entirely in cash, moving away from an earlier proposal that included a mix of cash and Netflix stock. This updated offer follows the initial announcement of the deal about six weeks ago.
Netflix stated that the funding for this revised offer would derive from a mix of available cash, lines of credit, and secured financing, as reported by CNN.
This strategic shift is aimed at fortifying the deal amidst increasing pressure from Paramount, which has made a hostile takeover attempt on WBD.
In its latest proposal, Netflix proposed an acquisition price of $27.75 per share for WBD’s film studio and streaming assets. These assets are anticipated to be separated into a new publicly traded company later this year. According to reports, CNN and WBD’s other cable channels will be formed into a distinct entity named Discovery Global.
Initially, Netflix had offered $23.25 per share in cash alongside stock. This mixed offer gave Paramount a foothold to argue that its competing all-cash proposal was, in fact, more advantageous.
WBD’s CEO, David Zaslav, mentioned on Tuesday that a special shareholder meeting will be arranged to vote on the deal once it clears review by the U.S. Securities and Exchange Commission (SEC). He anticipates that the vote will occur in the spring.
On a parallel track, Paramount is still pursuing its all-cash acquisition of WBD stock, offering $30 per share, and plans to nominate a director linked to Paramount to replace a WBD board member, as per statements made by Paramount CEO David Ellison earlier in January.
WBD has consistently rebuffed Paramount’s advances, contending that the collaboration with Netflix and the establishment of Discovery Global would better position investors. This sentiment was echoed by WBD’s Board of Directors Chairman, Samuel A. Di Piazza Jr., who expressed confidence in the value of their deal with Netflix.
“Transitioning to an all-cash offer gives us greater confidence in the remarkable value from our partnership with Netflix and allows shareholders to engage in a strategic plan for maximizing Discovery Global’s brand value,” he commented, according to CNN.
Conversely, Paramount argues that WBD’s cable channels lack significant equity value. Additionally, in early January, it filed a lawsuit in Delaware to gain further insight into WBD’s asset valuation.
Ellison indicated that the purpose of his move was to ensure that WBD shareholders receive adequate information to make a well-informed decision about whether to accept their offer.
Although the court refused to expedite Paramount’s request for the case, Netflix is set to announce its quarterly results after the market closes on Tuesday.
