David Ellison’s Paramount Skydance has revised its bid for Warner Bros. Discovery, putting pressure on Netflix to follow suit.
Paramount did not provide a number for its revised bid. Its previous offer was for $30 per share.
WBD previously turned down Paramount’s offers and decided to sell key assets, including its studio and HBO, to Netflix for $27.75 per share, also fully in cash. The Netflix deal doesn’t include WBD’s cable channels, such as HGTV and TNT, unlike Paramount’s bid. Netflix now has four days to raise its offer.
A higher offer would come as little surprise, despite Ellison saying his previous bid was “superior to Netflix’s.” Paramount had sweetened its offer several times before this latest one.
WBD told shareholders on February 17 that “a senior representative” from Paramount said the company would pay at least $31 per share for WBD, and that the bid wasn’t the company’s “best and final” proposal.
The Paramount head honcho was also overheard saying in mid-December that WBD’s board couldn’t accept his $30-per-share bid without “admitting breach of fiduciary duty,” Business Insider reported. That’s because it was the same offer the WBD board — which has a duty to act in the best interest of shareholders — had previously rejected.
All this suggested that an upgraded bid could be in the works.
WBD had raised several issues with Paramount’s previous offers, including that its equity wasn’t fully backstopped by Larry Ellison and its termination fee was lower than Netflix’s. Paramount addressed both points. WBD then said there would be additional costs it would incur if it accepted Paramount’s bid, such as a $2.8 billion breakup fee to Netflix, which Paramount said it had accounted for in its ninth bid.
A key part of Paramount’s argument is that WBD’s TV networks aren’t worth much, if anything, after factoring in debt and the trading price of Versant, a similar company.
Netflix, for its part, is pitching itself as a better option for shareholders and the entertainment industry, and has said that a Netflix-Warner Bros. tie-up would “create and protect jobs.”
The merger would have to go through an antitrust review. One wild card is President Donald Trump. Last week, a White House spokesperson told Business Insider that Trump “has great relationships with all parties in this potential transaction and remains neutral in this process with no preference for either bidder.”
Then, on Saturday, Trump called for Netflix to remove Susan Rice from its board “or pay the consequences.” During a podcast appearance, Rice, who served in senior roles in the Obama and Biden administrations, had made comments critical of the Trump administration and corporations that “take a knee.” Netflix co-CEO Ted Sarandos downplayed the president’s comments on Monday and added that their bid for Warner Bros. is “not a political deal.”
Regardless of who wins between Netflix and Paramount, a bidding war would benefit WBD shareholders. Kevin Mayer, Disney’s former top dealmaker, predicted in December that the battle between Netflix and Paramount could raise the cost to buy WBD by $5 billion to $10 billion.
