Update: Netflix has now walked away from the deal.
Original story: 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agreement remained in effect, and the board continued to recommend in favour of the Netflix transaction and had not withdrawn or modified its recommendation.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.
WBD shareholders will vote on the merger battle on March 20.
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