Key Points
- Netflix revised its Warner Bros Discovery deal to an all-cash offer of $27.75 per share, replacing the prior cash-and-stock structure.
- The move aims to speed shareholder approval and counter a hostile $30-per-share takeover bid from Paramount.
- WBD plans to spin off its cable networks into a separate public company ahead of closing the Netflix transaction.
Netflix has amended its agreement to acquire key studio and streaming assets from Warner Bros Discovery (WBD), shifting the transaction to an all-cash structure as competition from a hostile takeover bid by Paramount intensifies.
In a filing with the U.S. Securities and Exchange Commission (SEC) on Tuesday, Netflix said it will now pay $27.75 per share in cash to acquire WBD’s streaming platform HBO Max and its Warner Bros film and television studio assets. The companies had previously agreed in December to a transaction combining cash and stock, valuing the deal at approximately $72 billion in equity.
Ted Sarandos, the co-Chief Executive Officer of Netflix, said the revised offer provides greater financial certainty and could accelerate the timeline for shareholder approval. In a statement, Sarandos said the WBD board continues to unanimously support the transaction and believes it delivers the best outcome for stockholders, consumers, creators and the broader entertainment industry. He added that the all-cash structure simplifies the agreement and removes exposure to volatility in Netflix’s share price.
WBD confirmed Tuesday that its board unanimously approved the amended agreement and filed a preliminary proxy statement seeking shareholder approval. With the revised structure, shareholder approval could occur as early as late February or early March, earlier than the previously expected spring or early summer vote, according to reporting cited in recent media coverage.
As part of the transaction, WBD plans to separate its cable television networks, including CNN and TNT, into a new publicly traded company called Discovery Global. The separation is expected to be completed within six to nine months and before the closing of the sale to Netflix.
WBD also disclosed changes to the financial structure of the planned spinoff, including a $260 million reduction in the debt that would be assigned to the cable business. The company said the adjustment was designed to address shareholder concerns that the debt load could reduce investor interest in Discovery Global as a standalone entity.
In materials released Tuesday, WBD outlined its internal valuation analysis for the cable business, estimating a range of $1.33 to $6.86 per share. That implied value would be additive to Netflix’s $27.75-per-share cash offer when shareholders weigh the competing proposals.
Paramount, led by its Chief Executive Officer David Ellison, has offered to acquire all of WBD for approximately $108.4 billion, or $30 per share in cash. WBD’s board has repeatedly rejected that proposal, describing it as riskier and less likely to close due to its reliance on substantial debt financing and other conditions. Paramount has responded by launching a proxy fight and filing a lawsuit seeking additional disclosures related to WBD’s evaluation of the competing bids.
A judge recently denied Paramount’s request to expedite that lawsuit, ruling that the company had not demonstrated irreparable harm from the alleged disclosure deficiencies.
The revised Netflix agreement also removes a so-called collar mechanism tied to Netflix’s share price that was included in the original deal. Analysts have said eliminating that feature provides greater clarity on deal value at closing and could streamline regulatory review by the Securities and Exchange Commission.
Netflix is scheduled to report earnings after the market closes on Tuesday, and investors are expected to look for additional commentary on the transaction and its financing.
