David Ellison's Paramount Skydance is revising its bid for Warner Bros. Discovery as it battles Netflix
· Business Insider
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- Paramount has revised its bid for Warner Bros. Discovery, which already agreed to sell to Netflix.
- David Ellison's company wants all of WBD, while Netflix just wants the streaming and studio assets.
- Paramount didn't publicly share a price for the new bid, which is its 10th.
David Ellison's Paramount Skydance has revised its bid for Warner Bros. Discovery, putting pressure on Netflix to follow suit.
Paramount did not publicly share a price for its revised bid, which is its 10th. The company's previous offer was for $30 per share.
WBD told shareholders last week that "a senior representative" from Paramount said the company would pay at least $31 per share for WBD, and that its previous bid wasn't the company's "best and final" proposal.
"Following engagement with PSKY during the seven-day limited waiver period, we received a revised PSKY proposal to acquire WBD, which we are reviewing in consultation with our financial and legal advisors," WBD said in a statement on Tuesday. "We will update our shareholders following the Board's review. The Netflix merger agreement remains in effect, and the Board continues to recommend in favor of the Netflix transaction. WBD shareholders are advised not to take any action at this time with respect to the amended PSKY tender offer."
If WBD's board determines that Paramount's latest offer is "potentially superior or superior" to Netflix's, then Netflix would have four days to improve its offer, a person familiar with the deal process said.
WBD previously turned down Paramount's offers and decided to sell key assets, including its studio and HBO, to Netflix for $27.75 per share, also fully in cash. The Netflix deal doesn't include WBD's cable channels, such as HGTV and TNT, unlike Paramount's bid.
A higher Paramount offer should come as little surprise, despite Ellison saying his previous bid was "superior to Netflix's." Paramount had sweetened its offer several times before this latest one.
The Paramount head honcho was also overheard saying in mid-December that WBD's board couldn't accept his $30-per-share bid without "admitting breach of fiduciary duty," Business Insider reported. That's because it was the same offer the WBD board — which has a duty to act in the best interest of shareholders — had previously rejected.
All this suggested that an upgraded bid could be in the works.
WBD had raised several issues with Paramount's previous offers, including that its equity wasn't fully backstopped by Larry Ellison and its termination fee was lower than Netflix's. Paramount addressed both points. WBD then said there would be additional costs it would incur if it accepted Paramount's bid, such as a $2.8 billion breakup fee to Netflix, which Paramount said it had accounted for in its ninth bid.
A key part of Paramount's argument is that WBD's TV networks aren't worth much, if anything, after factoring in debt and the trading price of Versant, a similar company.
Netflix, for its part, is pitching itself as a better option for shareholders and the entertainment industry, and has said that a Netflix-Warner Bros. tie-up would "create and protect jobs."
The merger would have to go through an antitrust review. One wild card is President Donald Trump. Last week, a White House spokesperson told Business Insider that Trump "has great relationships with all parties in this potential transaction and remains neutral in this process with no preference for either bidder."
Then, on Saturday, Trump called for Netflix to remove Susan Rice from its board "or pay the consequences." During a podcast appearance, Rice, who served in senior roles in the Obama and Biden administrations, had made comments critical of the Trump administration and corporations that "take a knee." Netflix co-CEO Ted Sarandos downplayed the president's comments on Monday and added that their bid for Warner Bros. is "not a political deal."
Regardless of who wins between Netflix and Paramount, a bidding war would benefit WBD shareholders. Kevin Mayer, Disney's former top dealmaker, predicted in December that the battle between Netflix and Paramount could raise the cost to buy WBD by $5 billion to $10 billion.
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