Amid an escalating bidding war and a sinking share price, Netflix on Tuesday revised its $83 billion deal for Warner Bros. Discovery’s studio and streaming assets to an all-cash transaction in an effort to simplify its offer.
The all-cash transaction continues to be valued at $27.75 per share, with the all-cash component intended to provide “greater certainty of value,” and accelerate the path to a vote by April.. WBD stockholders will also receive additional value from shares of Discovery Global, Warner’s cable network spinoff that will take place in six to nine months.
The change comes amid WBD shareholder agitation for a more straightforward offer from Netflix, whose original cash-and-stock offer was hurt by recent decline in its share price, with the stock down nearly 30% since its initial bid. That complicated the argument that its offer was superior to Paramount’s $30 all-cash bid for the entire company.
The Netflix deal will be financed through a combination of cash on hand, available credit facilities and committed financing. Wells Fargo, BNP and HSBC are serving as the lead arrangers for the debt financing related to the transaction.
“Our revised all-cash agreement demonstrates our commitment to the transaction with Warner Bros. and provides WBD stockholders with an accelerated process and the financial certainty of cash consideration, while maintaining our commitment to a healthy balance sheet and our solid investment grade ratings,” Netflix co-CEO Greg Peters added. “We will continue to work closely with WBD to successfully complete the transaction as we remain focused on our mission to entertain the world and, together, define the next century of storytelling.”
“Today’s revised merger agreement brings us even closer to combining two of the greatest storytelling companies in the world and with it even more people enjoying the entertainment they love to watch the most,” Warner Bros. Discovery CEO David Zaslav added. “By coming together with Netflix, we will combine the stories Warner Bros. has told that have captured the world’s attention for more than a century and ensure audiences continue to enjoy them for generations to come.”
In December, Netflix and WBD agreed to a cash-and stock-deal, which was comprised of $23.25 in cash and $4.50 in stock, subject to a collar of $97.91 to $119.67 per share based on Netflix stock’s 15-day volume weighted average price (“VWAP”). But shares of Netflix have fallen below the collar, with the stock trading at $88 per share as of Monday’s close.
Paramount continues to argue its $108.4 billion bid is superior because of the total higher value (based on the assumption Discovery Global is close to worthless). The bid is backed by Oracle co-founder Larry Ellison’s irrevocable personal guarantee towards $40.4 billion of the equity financing, and $55 billion in debt financing from Bank of America, Citigroup and Apollo Global Management. Its other equity partners include RedBird Capital Partners and three Middle Eastern sovereign wealth funds.
Paramount last week sued to obtain additional disclosure around how the Netflix deal and Discovery Global spinoff were valued.
In a new regulatory filing on Tuesday, WBD valued Discovery Global’s equity between as little as $1.33 per share and as high as $6.86 per share in the event the company is acquired following the separation. The new Netflix deal also reduced the amount of Warner’s debt being placed on Discovery Global by $260 million due to better-than-expected cash-flow performance of the business last year. Discovery Global is expected to have $17 billion in debt as of June 30, 2026, which will decrease to $16.1 billion by the end of 2026.
“Our amended agreement with Netflix is a testament to the Board’s unrelenting focus on representing and advancing our stockholders’ interests,” WBD board chairman Samuel A. Di Piazza, Jr. said in a statement. “By transitioning to all-cash consideration, we can now deliver the incredible value of our combination with Netflix at even greater levels of certainty, while providing our stockholders the opportunity to participate in management’s strategic plans to realize the value of Discovery Global’s iconic brands and global reach. We look forward to continuing to engage with our investors about the compelling benefits of the transaction as we progress toward our stockholder vote on an accelerated timeline.”
Paramount’s tender offer is set to expire on Wednesday at 5 p.m. ET, though that deadline is expected to be extended after a Delaware judge dismissed its motion to expedite proceedings in its lawsuit against Warner Bros. Discovery. As of Dec. 19, less than 400,000 WBD shares had been validly tendered to Paramount Skydance.
The amended, all-cash deal, which was unanimously approved by Netflix and WBD’s boards of directors, represents a premium of 121% to WBD’s stock price of $12.54 prior to reports that Paramount planned to make an offer to acquire WBD and a 100% premium to WBD stock’s 52-week high.
Both Paramount and Netflix are engaging with regulators, including the Department of Justice and European Commission. Netflix reiterated that it expects a deal to close within 12 to 18 months from when the deal was first announced, while Paramount has said a potential deal would close within a year.
If Warner Bros. abandons the deal with Netflix, it would be required to pay the streamer a $2.8 billion termination fee. If the deal is blocked by regulators, Netflix would pay WBD a $5.8 billion breakup fee.
