Netflix Shifts to All-Cash Offer in Warner Bros. Acquisition Battle
In a significant development within the media industry, Netflix Inc. has reached an amended agreement to acquire Warner Bros. Discovery Inc.'s studio and streaming business entirely in cash. This move comes as Netflix faces stiff competition from Paramount Skydance Corp. in the pursuit of one of Hollywood's most storied entertainment companies.
Revised Terms and Strategic Implications
Previously, Netflix had agreed to pay US$27.75 per share through a combination of cash and stock for the Warner assets. According to a recent filing that confirms an earlier Bloomberg News report, the streaming giant will now pay the full amount in cash. This revision is strategically designed to expedite the sale process and address claims by Paramount that its competing US$30-per-share cash tender offer is superior.
Warner Bros. plans to convene a special meeting of shareholders to approve the deal, with Netflix indicating that stockholders should be able to vote on the transaction by April. The battle for Warner Bros., renowned for classic films from Casablanca to Batman, represents one of the largest media deals in recent years and has the potential to reshape the entertainment landscape.
Competitive Dynamics and Industry Impact
Paramount, the parent company of CBS and MTV, has been aggressively pursuing Warner Bros. since September, urging investors to tender their shares. Netflix emerged as a surprise contender in October after Warner Bros. put itself up for sale. The new all-cash terms from Netflix effectively neutralize one of Paramount's primary criticisms—that the stock portion of Netflix's initial offer made it less attractive.
Ted Sarandos, co-chief executive of Netflix, expressed confidence in the transaction, stating, "The Warner Bros. board continues to support and unanimously recommend our transaction, and we are confident that it will deliver the best outcome for stockholders, consumers, creators, and the broader entertainment community." Both Netflix co-chief executives had previously conveyed their optimism to investors at a UBS conference in December, asserting they are "super confident" the deal will gain approval.
Financial Details and Market Response
In premarket trading in New York, Warner Bros. shares experienced a slight decline of less than one percent, settling at US$28.50, while Netflix shares saw a modest increase of 1.2 percent. The amended agreement also addresses concerns regarding the valuation of Warner Bros.' cable networks, which include channels like CNN and TNT.
Under the revised plans, these cable properties will be spun off into a separate entity named Discovery Global. Warner Bros.' advisers have valued these networks within a range of 72 cents to $6.86 per share, a point of contention as Paramount has argued they hold no value despite accounting for a significant portion of its own sales and profit.
Debt Structure and Future Projections
The spinoff arrangement stipulates that Discovery Global will carry US$17 billion in debt as of June 30, 2026, with a projected decrease to US$16.1 billion by year's end. Furthermore, Netflix and Warner Bros. have adjusted the agreement so that Discovery Global will have US$260 million less debt than initially planned, attributed to stronger-than-anticipated cash flow in the previous year.
Warner Bros. has consistently rejected multiple offers from Paramount, leading to heightened tensions. Paramount has threatened to initiate a proxy fight and has filed a lawsuit to compel Warner Bros. to disclose more details about the Netflix bid and the valuation of the cable properties. This ongoing dispute underscores the high stakes involved in this landmark media acquisition.
