Stories by Vanessa Obioha
Netflix stunned Hollywood last Thursday when it announced that it is backing out of the bid for Warner. Bros Discovery (WND). The streaming giant had been in a fierce takeover bid with Paramount since last December when it reached an $83 billion deal to acquire Warner Bros. Discovery’s studio and streaming assets, including HBO. Days after it announced its move, Paramount launched a dramatic counteroffer, saying it would take its $30-per-share all-cash bid directly to Warner Bros. Discovery shareholders. The offer, which includes the company’s Global Networks business, values the entire group at $108 billion. Paramount also urged Warner Bros. Discovery to reject Netflix’s proposal.
Although WBD seemed ready to go with the Netflix plan, all of that changed two weeks ago when it offered Paramount a seven-day period to negotiate its best deal. Part of the turnaround was due to pressure from shareholders who insisted that WBD should give Paramount a second chance. Also, Paramount agreed to pay the $2.8 billion fee Warner Bros. Discovery would owe to Netflix if their agreement were terminated, as well as agreeing to back WBD’s debt costs.
Last Tuesday, WBD announced that it had received a revised deal from Paramount which now valued the company at $31 a share.
Paramount under the leadership of David Ellison in the new offer said it would pay shareholders a so-called ticking fee of 25 cents a share per quarter if the deal didn’t close by Sept. 30. It would also pay a $7 billion termination fee if the deal failed to close because of regulatory obstacles.
While Netflix has four days to raise its bid, and enough cash to do so, the streaming giant chose instead to decline.
In a statement on its website, the company co-CEOs Ted Sarandos and Greg Peters stated that the earlier negotiation would have
“created shareholder value with a clear path to regulatory approval. However, we’ve always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid.”
The company also believed that it would have been “strong stewards of Warner Bros.’ iconic brands,” and that its deal would have “strengthened the entertainment industry and preserved and created more production jobs in the U.S. But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.”
With Netflix’s withdrawal, Paramount is on its way to owning WBD, that is, if regulators approve it.
“Netflix is a great company and throughout this process Ted, Greg, Spence and everyone there have been extraordinary partners to us. We wish them well in the future,” said David Zaslav, president and CEO of Warner Bros. Discovery. “Once our Board votes to adopt the Paramount merger agreement, it will create tremendous value for our shareholders. We are excited about the potential of a combined Paramount Skydance and Warner Bros. Discovery and can’t wait to get started working together.”
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