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Netflix has amended its bid for Warner Bros Discovery’s studio and streaming businesses to an all-cash offer as it seeks to fight off a rival hostile offer from Paramount.
On Tuesday, WBD said that its board had unanimously backed the revised bid, which will pay its shareholders $27.75 per share in cash instead of a mixture of cash and stock. However, Netflix did not increase its bid, which values the business at $82.7bn including debt.
The revised agreement would simplify the transaction structure, provide greater certainty of value for WBD stockholders and speed up the path to a stockholder vote, Netflix said in a statement.
Netflix said it had increased a debt commitment from Wall Street banks to $42.2bn, up from $34bn previously, to reflect the greater cash consideration it was now offering to WBD shareholders.
The move comes as Paramount steps up its $30-per-share hostile rival bid for WBD in a takeover battle set to reshape Hollywood and create a new media landscape for TV, filmmaking and news.
Paramount has threatened a proxy battle, saying it would nominate directors to WBD’s board to vote against the Netflix deal. It has also filed a lawsuit seeking disclosure of financial information related to the deal, but lost its bid to fast-track it.
Paramount has sweetened its own $108.4bn offer for the whole of WBD with the backstop of a personal guarantee by Larry Ellison, a co-founder of Oracle, whose son David Ellison is leading the bid as chief executive of Paramount.
Pentwater Capital Management, WBD’s seventh-largest shareholder, threatened last week to vote down the Netflix deal if Paramount sweetened its bid and WBD failed to re-engage with the company.
Paramount is expected to increase its bid, according to people who have discussed the matter with the company’s top officials. However, these people added that it was unclear when it would make its next move.
Alex Fitch, head of US research at fund manager Harris Associates, said that “we don’t think this bidding war is over yet”.
“The changes show that Netflix is serious about winning, and the accelerated shareholder vote means Paramount needs to act with urgency. Now it is up to Paramount to provide a clearly superior offer if they want to get this done,” he said.
WBD also released its preliminary proxy statement in advance of scheduling a shareholder vote. According to the filing, Warner’s investment bankers had earlier this week valued Discovery’s Global Networks business — which includes CNN and would be spun off under the Netflix proposal — at between $1.33 and $6.86 per share.
Paramount had said in its filings that the networks division could be worth as little as $0 per share, a valuation that would leave the total value of the Netflix deal below the $30 per share that Paramount has bid.
WBD wrote in the proxy statement that “[t]he risk-adjusted value offered by Paramount is inadequate and not superior” when compared with the Netflix bid.
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