Warner Bros Discovery (WBD) has reopened discussions with Paramount Skydance (PSKY) over a potential takeover, giving the studio until February 23 to submit its final offer.
This comes nearly two months after Warner Bros rejected Paramount’s initial $30-a-share bid in favour of a deal to sell its streaming and studio businesses to Netflix.
Warner Bros’ board said Paramount has addressed many issues noted in previous offers. “To be clear, our Board has not determined that your proposal is reasonably likely to result in a transaction that is superior to the Netflix merger,” Warner Bros Chairman Samuel DiPiazza Jr. and CEO David Zaslav wrote in a letter to Paramount.
“We continue to recommend and remain fully committed to our transaction with Netflix.”
Warner Bros. Discovery Board Weighs Paramount’s Sweetened $30 Per Share Bid
Paramount has offered to increase its bid to $31 per share if Warner Bros agrees to open formal talks. The company has also provided a personal guarantee of $40 billion in equity from Oracle founder Larry Ellison, father of Paramount CEO David Ellison.
Warner Bros said it expects Paramount’s best and final offer to exceed that amount.
Paramount’s latest attempt to win over shareholders includes extra cash for each quarter the deal fails to close and covering the $2.8 billion breakup fee Warner Bros would owe Netflix if the merger falls through.
Despite these concessions, Warner Bros said Paramount’s offer still leaves important issues unresolved, including coverage of potential $1.5 billion junior lien financing fees and full certainty of equity funding.
The Netflix deal, which values Warner Bros’ studios and streaming assets at $82.7 billion, is still the board’s recommended option.
Shareholders are scheduled to vote on the merger on March 20, after Warner Bros spins off its Discovery Global cable operations into a separate public company.
Discovery Global includes CNN, TLC, Food Network, and HGTV and could fetch between $1.33 and $6.86 per share, according to Warner Bros estimates.
Paramount has also pushed to nominate directors to Warner Bros’ board, with Pentwater Capital CEO Matt Halbower among potential candidates. “Every substantive complaint that the Warner Bros board had with Paramount’s previous offer has been addressed,” Halbower said last week.
Activist investor Ancora Holdings, which owns nearly $200 million in Warner Bros shares, has urged the company to fully engage with Paramount’s proposal. Netflix, meanwhile, acknowledged the renewed talks but reaffirmed its confidence in the merger.
“While we are confident that our transaction provides superior value and certainty, we recognize the ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY’s antics,” Netflix said.
Paramount Skydance’s market value stands at $11.1 billion, with shares trading around $10.32. Warner Bros Discovery’s market cap is roughly $69.4 billion, with shares at $27.99.
Netflix is by far larger at $324.6 billion, trading near $76.87. Analysts say this scale explains why the Netflix offer is seen as more stable despite its lower total dollar value.
