Paramount Extends Warner Bros Bid as Netflix Rivalry Heats Up

The company said it did not increase the value of its bid. By the original January 21 deadline, only about 168.5 million Warner Bros shares had been tendered, representing roughly 6.8% of the company’s outstanding stock, per Reuters. The proposed acquisition would reshape the entertainment industry, giving the buyer control of major franchises such as Friends, Batman and the HBO Max streaming platform.

Netflix, which is also pursuing Warner Bros, revised its own offer earlier this week to an all-cash structure in a bid to speed up closing and ease investor concerns over its earlier stock-and-cash proposal, according to Reuters. The streaming giant is now offering $27.75 per share, valuing the transaction at about $82.7 billion. The Warner Bros board has unanimously approved that deal.

Paramount has taken a more aggressive stance, combining its bid with legal action and a public campaign aimed at bringing Warner Bros to the negotiating table. However, analysts and company officials have suggested that Paramount may need to increase its $108.4 billion offer, or $30 per share for the entire company, to reopen talks, according to Reuters.

Warner Bros defended its decision to back the Netflix deal, saying, “We are confident in our ability to achieve regulatory approval for the Netflix merger.” The company added that the agreement provides “tremendous and certain value,” while noting that Paramount has continued to present proposals that its board has rejected repeatedly, per Reuters. Netflix declined to comment when contacted by the news agency.

Earlier this month, Warner Bros also rejected a revised Paramount offer that included $40 billion in equity guaranteed by Larry Ellison, the Oracle co-founder and father of Paramount CEO David Ellison, according to Reuters. A shareholder vote on the Netflix deal is expected by April, when investors will weigh the value of Warner’s cable assets—assets that Paramount has argued are effectively worthless.

Related: EU Set to Review Rival Netflix and Paramount Skydance Bids for Warner Bros. Discovery

Once it receives approval from the U.S. Securities and Exchange Commission, Paramount plans to urge Warner Bros shareholders to vote against what it has called the “inferior Netflix transaction,” per Reuters. Bloomberg News reported that Netflix co-CEO Ted Sarandos is expected to testify next month before a U.S. Senate committee regarding the proposed merger.

Paramount has also indicated that if shareholders reject the Netflix deal, it would move quickly to replace Warner Bros board members with directors open to reconsidering its offer, according to a person familiar with the matter cited by Reuters.

A central point of contention is the handling of $17 billion in debt that Netflix plans to offload onto Discovery Global, a spinoff that would hold Warner’s cable assets. Paramount has argued that this debt transfer is essential to the Netflix deal and that failure to move it as planned would significantly reduce shareholder returns, according to Reuters.

Warner Bros has said its advisers used three different valuation methods for Discovery Global, producing a range from $1.33 per share at the low end to $6.86 per share if the spinoff later became part of another transaction. Paramount has repeatedly maintained that its proposal offers better value and faces fewer regulatory hurdles than Netflix’s, per Reuters.

The Ellison family has suggested that its ties to U.S. President Donald Trump could help smooth the regulatory process, while Sarandos said on a recent earnings call that Netflix has made progress toward securing approvals. Netflix expects that adding HBO Max would allow it to introduce more flexible and personalized subscription options and expand into theatrical releases.

Still, some analysts warn that a merger with Warner Bros could bring near-term challenges, including integration costs, higher content spending and a heavy debt burden for the combined company, according to Reuters.

Source: Reuters