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Capping a remarkable turnaround in the ongoing merger battle, the Warner Bros Discovery (WBD) board has determined that Paramount’s latest improved bid is superior to that of Netflix.
Thursday’s development means Netflix now has four business days in which to respond with revisions to its offer, expiring on Wednesday March 4 at 11.59pm.
Until Thursday, the streamer had been the clear frontrunner after WBD accepted its $27.75 per-share bid for the Warner Bros streaming and studios business in December.
At time of writing the WBD board said the Netflix merger agreement remained in effect, and the board continued to recommend in favour of the Netflix transaction and had not withdrawn or modified its recommendation.
However the equation has now changed dramatically.
Paramount’s revised $31 per-share offer with sweeteners has struck a blow for David Ellison’s media company. Should the WBD board determine after the four-day window that the Paramount offer remains superior, it would have the right to terminate the Netflix merger agreement.
Paramount’s revised offer for the entirety of WBD run by CEO David Zaslav includes a “ticking fee” equal to 25 cents per quarter that kicks in after September 30 until the transaction closes; a $7bn “regulatory termination fee” that Paramount would pay should the transaction not close due to regulatory matters; and payment of a $2.8bn termination fee that WBD would owe to Netflix should it terminate the existing agreement.
Paramount reaffirmed in its revised bid that it will eliminate WBD’s potential $1.5bn financing cost associated with its debt exchange offer; agreed to an obligation to contribute additional equity funding needed to support the solvency certificate required by Paramount’s lenders; and agreed to a “Company Material Adverse Effect” definition that excludes the performance of WBD’s cable TV business.
Netflix co-CEO Ted Sarandos met with White House staff in Washington DC on Thursday in a pre-planned visit to argue his company’s case that did not include an audience with president Trump.
After saying he would stay out of the matter, Trump indirectly waded back into the midst of the merger battle this week when he called on Netflix to fire Susan Rice from its board after podcast comments by the former Biden and Obama administration official. When asked about Trump’s outburst earlier this week, Sarandos said the WBD transaction was a business deal and not a political deal.
Trump has praised Sarandos in the past, and is a friend of Larry Ellison, the centibillionaire Oracle co-founder who is the father of David Ellison and is personally backstopping the $40.4bn equity portion of the Paramount offer. Trump also met with David Ellison earlier this month.
WBD reported Q4 earnings earlier in the day. The company’s shareholders will vote on the merger battle on March 20.
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