Netflix, the American streaming giant, is considering modifying the terms of its proposed acquisition of Warner Bros. Discovery (WBD) to present a revised offer entirely in cash for the studios and HBO Max.
The goal is to expedite a transaction that could take months to finalize due to potential political opposition to the merger, as well as the interest of its rival, Paramount Skydance (PSKY), in acquiring 100% of the company led by David Zaslav.
According to the original agreement, proposed on December 5, WBD shareholders would receive $23.25 in cash and another $4.50 in Netflix common stock, bringing the total value of the offer to approximately $82.7 billion (€7.94 billion). However, sources familiar with the situation told Bloomberg that the Los Gatos-based platform is considering modifying the terms of its proposal so that the payment is entirely in cash.
This change would make sense after Netflix’s share price has lost around 25% of its value since it expressed interest in WBD last October.
Netflix, which secured $59 billion (€50.61 billion) in financing from Wall Street banks to support the acquisition, has the financial capacity to obtain more loans and still maintain strong credit ratings, according to Stephen Flynn, senior credit analyst at Bloomberg Intelligence.
On Monday, Paramount Skydance (PSKY) filed a lawsuit against Warner Bros. Discovery (WBD) to force the company to disclose the details of the offer presented by Netflix, after the board of directors of the HBO Max owner repeatedly considered the streaming platform’s merger proposal superior.
In this regard, last week, WBD’s management unanimously rejected PSKY’s offer, which had been modified on December 22 to include an irrevocable personal guarantee from Larry Ellison, co-founder of Oracle and father of David Ellison. The chairman of the WBD board and owner of HBO Max, Samuel di Piazza, stated that Paramount’s proposal continued to offer “insufficient value.”
Specifically, Di Piazza highlighted the “extraordinary amount” of debt financing clauses that created risks for the closing of the transaction and reduced the protection for WBD shareholders if the acquisition were not completed.
In contrast, the WBD board maintained that the binding agreement with Netflix offered superior value and greater certainty, without the risks and costs that Paramount’s offer would impose on shareholders.
Paramount’s plan for the entirety of WBD is valued at more than $108.4 billion (€92.986 billion), compared to the $82.7 billion offer from the streaming platform, although the latter only targets the film and television studios, in addition to HBO Max and HBO.
