Paramount Skydance Corp. on Tuesday tabled a new $31-a-share buyout offer for Warner Bros. Discovery Inc., potentially sparking another bidding war with Netflix Inc., which is seeking to improve its own deal, reported Bloomberg.
The famed Hollywood studio isn’t withdrawing its recommendation that investors support Netflix’s $27.75-a-share agreement to acquire the company’s studio and HBO operations, according to a statement Tuesday. Instead, it maintains that the latest Paramount terms meet the threshold for further talks.
Paramount pursuing deal with Warner Bros.
Paramount’s latest salvo shows the company, led by David Ellison, isn’t dropping its pursuit of Warner Bros. anytime soon. The sweetened offer will test Netflix’s appetite to pay up for Warner Bros.’ production studios and a library that includes the DC Comics franchise and Game of Thrones.
“The board has not made a determination as to whether the revised Paramount proposal is superior to the merger with Netflix,” Warner Bros. said. It plans more talks with Paramount and said Netflix will have four business days to respond if the board backs the sweetened offer.
The board’s decision came after a seven-day period in which Paramount was allowed to once again negotiate with Warner Bros. Paramount has been seeking to acquire the parent of HBO and CNN since September, raising its offer price multiple times and making changes to the terms requested by the Warner Bros. board.
Negotiations on: Here’s what we know
The two companies were still negotiating late into last night and had to hang up the phone at midnight when the discussion window expired, according to people with knowledge of the matter. That left lingering questions that the parties can now address.
The revised Paramount proposal marks an increase of $1 from the company’s previous $30-a-share offer, which was valued at about $108 billion including debt. Netflix’s proposal is valued at $82.7 billion on that basis, though Warner Bros. believes a spinoff of its cable channels will deliver additional value to its investors.
Paramount’s latest proposal includes a “ticking fee” of 25 cents per share for each quarter after 30 September that the deal hasn’t received regulatory approval, along with a $7 billion payment to Warner Bros. if regulators block the sale.
Paramount also agreed to contribute more equity if any of its lenders used doubts about its solvency to avoid funding the deal. Paramount also won’t use the deterioration of Warner Bros.’ cable networks as an excuse to renege on the deal.
Studios see business impact
Shares of Warner Bros. were down less than 1% in extended trading after the announcement, possibly because some investors were expecting more. Paramount and Netflix both rose more than 1%.
Ellison, Paramount’s chief executive officer, launched a tender offer to acquire Warner Bros. shares in December, days after the Netflix deal was announced. The move by Ellison, 43, followed his $8 billion August takeover of Paramount, the owner of CBS and MTV.
Studios like Paramount and Warner have been under pressure to combine, hurt by declining revenue from traditional media services like cable television and movie theatres. After spending heavily to build up streaming services, studios have cut production and jobs to push those newer operations to profitability.
Warner Bros. said in October it was considering all of its options after receiving unsolicited interest from multiple parties. Paramount, Netflix and Comcast Corp. were among the bidders interested in acquiring all or part of Warner Bros.
The bidding got contentious, with Paramount accusing Warner Bros. of running an auction that favoured Netflix. Some Warner Bros. shareholders, including Pentwater Capital Management and Ancora Holdings, had publicly advocated for the company to re-engage in talks with Paramount.
(With inputs from Bloomberg)