Warner Bros Discovery’s studio and streaming assets have been reduced to an all-cash offer on Netflix as a way to stop Paramount’s rival attempts to acquire the Hollywood gizmo.
According to a regulatory filing on Tuesday, the Warner Bros board voted unanimously for the new all-cash bid, which is currently $ 27.75 per share.
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Warner Bros is favored by Paramount Skydance and Netflix over its top film and television studios, extensive content library, and a strong fan base for the superheroes Batman and Superman from DC Comics and Game of Thrones.
Warner Bros has detested the David Ellison-led company, despite Paramount’s changing terms and aggressive media campaigns to try to persuade shareholders that its offer is better. Larry Ellison, the billionaire founder of Oracle, is a close ally of Donald Trump, the president of the United States. On Tuesday, Paramount’s all-cash offer was removed from the company’s comments.
The streaming pioneer claims that the meeting was scheduled to take place by April and that Warner Bros will convene a special investor meeting to vote on the Netflix deal.
Netflix co-CEO Ted Sarandos stated in a statement that “our revised all-cash agreement will allow an expedited timeline for a stockholder vote and provide greater financial certainty.”
Netflix’s stock is up 0.7%, with quarterly earnings scheduled to come out after the close of the market. Warner Bros’ shares increased 0.7% in midday trading while Paramount shares dropped 1.1 percent.
The bidding war for Warner Bros may not be over, according to Alex Fitch, portfolio manager for Harris Oakmark, the fifth-largest shareholder in the company as of September 30.
Fitch claimed that “this new agreement only increases the pressure.” “The changes demonstrate that Netflix is serious about winning, and Paramount must act with urgency as a result of the accelerated shareholder vote.” If Paramount wants to get this done, they must now make a clearly superior offer.
Netflix’s stock has fallen nearly 15% since the merger’s announcement on December 5, and it closed at $88 per share on Friday, which is significantly below the original bid’s $97.91 floor price. Paramount’s claim that its bid was better was supported by that drop.
Netflix’s new $ 27.75-per-share offer replaces its previous $ 23.25 cash and $ 4.50 stock bid.
A fixed cash amount will be paid by an investment-grade company to provide [Warner Bros] stockholders with certainty of value and liquidity right away after the merger is concluded, according to Warner Bros.
Additionally, the board of directors made a statement regarding the company’s valuation of Discovery Global, a planned spin-off that will include television assets like CNN, TNT Sports, and the Discovery+ streaming service.
Due to Warner Bros’ shareholders’ continuing ownership of the separately traded Discovery Global, the board has argued that the Netflix merger deal is superior to Paramount Skydance’s $30-per-share cash offer for the company.
The valuation of Discovery Global was based on three different methods employed by Warner Bros. By applying a single value across the entire company, they came to a price of $1.33 per share. If the spin-off became involved in a pending transaction, the price would be $6.86 per share.
The cable spinoff that is fundamental to the streaming service giant’s offer, according to Paramount, is essentially useless.
A deadline is approaching.
A Delaware court judge rejected the request, finding that Paramount had failed to demonstrate it would suffer irreparable harm from the alleged inadequate disclosures about Warner Bros’ cable TV business, so the rival bidder went to court on January 12.
A Reuters request for comment was not immediately responded to by Paramount Skydance, whose tender offer expires on January 21.
“Paramount will appeal to shareholders in another way. The appeal will be merely window dressing, according to E-marketer analyst Ross Benes.
As Warner investors weigh the worth of cable assets, the race is anticipated to come to a head at a shareholder vote later this year.
After considering the “price and numerous risks, costs, and uncertainties,” Warner Bros reiterated its reasons for rejecting the Paramount bid. It claimed that its $30 all-cash offer was insufficient.
The Warner Bros deal’s inclusion of all-cash on Netflix is a wise decision, according to Matt Britzman, senior equity analyst at Hargreaves Lansdown. Even if it doesn’t reduce regulatory scrutiny, “a cash bid removes uncertainty and is unquestionably more appealing from the perspective of Warner Bros.”
When Netflix merges, the two companies would have roughly $85 billion in debt, compared to $87 billion for Paramount. However, Netflix is much more valuable, reaching $ 402 billion on the market, compared to $ 12.2 billion for Paramount.
The Netflix tie-up would have a lower leverage ratio than Paramount’s, which is about seven.
According to the regulatory filing, Netflix also agreed to let Warner Bros reduce Discovery Global’s indebtedness by $ 260 million.
Warner Bros said in its filing that Netflix also has an investment-grade credit rating, whereas Paramount’s bonds have S& and P ratings and are likely to be put under even greater pressure.
Given that lawmakers from all political parties have expressed concerns that further media consolidation may lead to higher prices and less choice for consumers, winning over shareholders’ approval may only be the first step in what could be a protracted process.
Source: Aljazeera
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