Warner Bros Discovery agreed to temporarily reopen sale negotiations with rival Hollywood studio Paramount Skydance, setting the stage for a potential second bidding war with Netflix.
Warner Bros negotiated a waiver with the streaming giant that will allow it to engage with Paramount for seven days about the terms of its most recent offer, according to a statement on Tuesday. The decision came after a Paramount banker told a Warner Bros. board member that Paramount would offer at least $31 a share if the company agreed to reopen talks. That’s $1 a share more than Paramount’s last proposal. The company also said the current bid is not its “best and final” offer.
Warner Bros said the board still unanimously recommends shareholders vote in favour of its binding agreement to sell its namesake studios and HBO Max streaming business to Netflix for $27.75 a share. It has scheduled a shareholder vote on the Netflix deal for March 20th.
“Throughout the entire process, our sole focus has been on maximising value and certainty for WBD shareholders,” Warner Bros chief executive David Zaslav said in the statement.
Warner Bros shares rose 2.5 per cent in premarket trading in New York. Paramount was up about 4 per cent while Netflix gained less than 1 per cent.
The decision to re-engage with Paramount comes after the hostile suitor submitted an offer with amended terms on February 10th that addressed several of the Warner Bros board’s key concerns.
Under the terms of the waiver granted by Netflix, Warner Bros. can engage with Paramount until February 23rd. It has asked Paramount for its best and final proposal and in that time it plans to discuss unresolved deficiencies in the latest offer, according to the statement. If after that negotiating period the Warner Bros. board determines that Paramount has put forth a superior proposal, Netflix will have the right to match Paramount’s most recent offer to keep its existing agreement intact.
Paramount has been trying to buy Warner Bros since September of last year, an effort that resulted in Warner Bros formally putting itself up for sale. The company increased its bid several times before ultimately losing to Netflix. Three days later, Paramount mounted a hostile tender offer for Warner Bros at $30 per share.
Under the terms of the Netflix agreement, Warner Bros cable-TV channels, such as CNN, will be spun off into a new company, Discovery Global.
“While we are confident that our transaction provides superior value and certainty, we recognise the ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY’s antics,” Netflix said in a statement. “This does not change the fact that we have the only signed, board-recommended agreement with WBD, and ours is the only certain path to delivering value to WBD’s stockholders.”
Netflix said it’s confident that its transaction has a clear path to timely regulatory approval.
Paramount, which intends to buy all of Warner Bros, has insisted its deal is better for shareholders and has spent the last couple months wooing regulators and investors.
In Paramount’s most recent proposal, it agreed to cover a $2.8 billion fee owed to Netflix if Warner Bros terminates their agreement, and offered to backstop a Warner Bros debt refinancing. Paramount also said it will compensate Warner Bros shareholders if the deal doesn’t close by December 31st, underscoring its confidence that the deal will get swift regulatory approval. – Bloomberg
