Paramount's Latest Offer Might Outshine Netflix’s Agreement, According to Warner

Warner Bros. Discovery announced on Tuesday that it has received an updated proposal from Paramount to acquire the entire company at $31 per share, increased from the prior offer of $30 per share. This move represents Paramount's latest attempt to counter a competing bid from Netflix, which has secured a deal for Warner's sought-after studios and HBO Max streaming service. Warner stated its board has concluded that Paramount’s enhanced offer 'could reasonably be expected to lead' to a proposal that surpasses the existing agreement with Netflix. Should Warner determine that Paramount's proposal is more favorable, Netflix reserves the right to match it according to the terms of its agreement. Warner has yet to make that assessment. The deal with Netflix involves purchasing the studios and HBO Max for $27.75 per share, aggregating to $72 billion. Paramount's earlier bid, led by David Ellison, was set at $30 per share, amounting to $77.9 billion, covering the entire company, including cable networks CNN and TNT, which Netflix does not wish to acquire. As part of the revised proposal, Paramount has agreed to exclude the Warner cable networks from the deal’s 'material adverse effect' clause, ensuring that any decline in the value of the linear TV networks prior to closing won't impact the transaction's price. Warner noted that Paramount's owner has also consented to provide additional funding if necessary to meet its lenders’ requirements. In addition to the $31 per share cash offer, Paramount introduced a 'ticking fee' of 25 cents per share for each quarter the deal remains unresolved, starting after September 30. Under the previous offer, this fee would have begun in January 2027. The proposal also includes a $7 billion regulatory termination fee if the transaction does not finalize due to regulatory issues, along with an obligation for Paramount to cover a $2.8 billion breakup fee owed to Netflix should that deal collapse. Warner emphasized that the Netflix merger agreement is still valid, and the Board continues to support the Netflix transaction while advising shareholders to refrain from taking any action regarding the updated PSKY tender offer. Warner re-instituted negotiations with Paramount last week, providing them a seven-day period to present their 'best and final' offer. In response, Paramount expressed satisfaction with the WBD board’s assessment and looks forward to productive discussions to highlight the advantages of Paramount’s proposal for WBD shareholders, the creative community, and consumers. Paramount is set to announce its latest earnings on Wednesday, while Warner will do so on Thursday. Following the adjustment to its offer, Paramount agreed to cover the termination fee Warner would owe to Netflix and introduced the 25-cent ticking fee. Netflix has acknowledged Warner's decision to allow Paramount to renegotiate and maintains its belief that its offer remains superior, seeking to eliminate the 'ongoing distraction' of Paramount’s attempts to challenge the deal. Last week, Netflix also initiated a public relations campaign against Paramount, with Co-Chief Executive Ted Sarandos participating in several interviews to advocate for the benefits of its proposal for shareholders and the entertainment sector. Both proposals will undergo scrutiny from regulatory bodies in the U.S. and internationally. The Justice Department is currently investigating whether Netflix may have engaged in anti-competitive behavior regarding its offer for Warner studios and HBO Max, according to previous reports from The Wall Street Journal. Netflix attorney Steven Sunshine has disputed these claims, asserting that the Department is simply conducting a standard review of its proposal. Over the weekend, former President Trump criticized Netflix for having Susan Rice, a former adviser to Presidents Obama and Biden, on its board, demanding her removal or warning of consequences. Rice recently stated on a podcast that when Democrats regain power, they should not 'forgive or forget' those organizations that 'bent the knee' to Trump. She argued that a long-term strategy is essential, rather than the short-sighted approach that has proven detrimental. Neither Netflix nor Rice has responded to requests for comments.