In a major update to its ongoing sale process, Warner Bros. Discovery (WBD) has set a March 20 vote for its blockbuster deal with Netflix… but the company says that it will reengage with David Ellison‘s Paramount Skydance to see if it can resolve the outstanding issues it had with PSKY’s bid, and to secure a “best and final” offer from the company.
WBD said that Netflix had granted it a seven day waiver to talk with Paramount to try and resolve the issues, and get a final offer. WBD said that after PSKY’s last offer, a representative for Ellison’s company told a WBD board member that it was willing to pay $31 per share for WBD, and that it would still not be its “best and final” offer.
It is not clear yet whether Paramount will take WBD up on its offer to reengage, or if it will instead pursue a proxy fight to convince shareholders to vote down the Netflix deal. The March 20 date means that it will be a spring to the finish if this turns into a proxy fight.
Netflix, it should be noted, has the right to match any offer from PSKY under its merger deal with WBD.
“Throughout the entire process, our sole focus has been on maximizing value and certainty for WBD shareholders,” said David Zaslav, president and CEO of Warner Bros. Discovery. “Every step of the way, we have provided PSKY with clear direction on the deficiencies in their offers and opportunities to address them. We are engaging with PSKY now to determine whether they can deliver an actionable, binding proposal that provides superior value and certainty for WBD shareholders through their best and final offer.”
The news comes after reports over the weekend that members of the board of WBD were discussing whether to re-engage with Paramount, which has also been pushing its hostile takeover bid directly with shareholders in its effort to derail the previously agreed $82.7 billion Netflix deal. That deal was first unveiled in December and amended into an all-cash bid in late January.
On Feb. 10, Paramount had added sweeteners to its own bid for all of WBD, inlcuding with a promise to cover the $2.8 billion fee owed to Netflix if WBD pulled out of its deal with the streamer and to backstop a refinancing that would cut costs by $1.5 billion. Paramount also added a so-called “ticking fee” of $650 million in cash per quarter if the deal is not completed by the end of 2026. Said Ellison: “We are making meaningful enhancements – backing this offer with billions of dollars, providing shareholders with certainty in value, a clear regulatory path, and protection against market volatility.”
Warner Bros. said in response that it would review the amended offer, but didn’t immediately modify its recommendation for shareholders to approve the Netflix deal. Some smaller shareholders have been pressuring WBD to engage with Paramount.
On Tuesday, WBD’s board said that it’s board still “unanimously recommended” the Netflix deal.
The maneuver Tuesday does open the door for Paramount, though it suggests that Netflix still has the upper hand in the fight for the company, especially when considering its ability to match.
In a letter sent to PSKY’s board Tuesday, WBD outlined the key unresolved issues, which include concerns around debt refinancing, and Paramount assuming the same terms that Netflix agreed to with regard to “material adverse effects” as “interim operating covenants” as well as providing “absolute clarity” on its equity funding, with WBD getting notice on any equity syndication.
WBD is expected to send PSKY an executable term sheet for markup, hoping to eliminate ambiguity about the ability to follow through on the deal.
Paramount believes that the Netflix deal faces serious antitrust hurdles in both the U.S. and Europe, and that it would offer a clearer path to passage.
Paramount recently hired Rene Augustine, a former lawyer for U.S. President Donald Trump, as senior vp of global public policy. She came to take over global public policy for the firm after serving as deputy assistant attorney general in the antitrust division of the U.S. Department of Justice from 2019 to 2021. She has also served on committees at the Kennedy Center, including as a Trump appointee to the President’s Advisory Committee on the Arts and then as co-chair of the National Committee for the Performing Arts. Previously, she held senior roles at the White House, including as Special Assistant to Trump during his first presidential term and senior associate counsel in the White House Counsel’s Office. She also served as Associate Counsel in the White House Counsel’s Office.
“As announced today, we continue to believe the Netflix merger is in the best interests of WBD shareholders due to the tremendous value it provides, our clear path to achieve regulatory approval and the transaction’s protections for shareholders against downside risk,” added Samuel A. Di Piazza, Jr., chair of the Warner Bros. Discovery board of directors. “With Netflix, we will create a brighter future for the entertainment industry – providing consumers with more choice, creating and protecting jobs and expanding U.S. production capacity while increasing investments to drive the long-term growth of our industry.”
In a statement of its own Tuesday, Netflix said that it “is confident that our transaction, a largely vertical merger of complementary assets, has a clear path to timely regulatory approval.
“Netflix and WBD are driving the regulatory process forward — collaboratively and constructively and focused on a clear path to closing,” it continued. “By contrast, PSKY has repeatedly mischaracterized the regulatory review process by suggesting its proposal will sail through, misleading WBD stockholders about the real risk of their regulatory challenges around the world. WBD stockholders should not be misled into thinking that PSKY has an easier or faster path to regulatory approval – it does not.”
All of that being said, the big transaction has also been a drag on Netflix’s stock, with Guggenheim Securities analyst Michael Morris recently noting: “We expect the path to conclusion on the WBD bid will remain a primary sentiment driver and likely share appreciation limiter over the next three months.” And Robert Fishman, analyst at MoffettNathanson, recently wrote: “Netflix’s stock price should have a harder time rebounding as long as the ongoing WBD potential bidding war continues.”
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