In it most unexpected plot twist of the film industry of the moment, Paramount Skydance is preparing to acquire Warner Bros. Discovery in its entirety after the withdrawal of bidding netflix.
What seemed like a sure sale to Netflix has taken a surprising turn of events in less than 24 hours to position Paramount Skydance, a conglomerate owned by David Ellisonas the next owners of WBD.
Netflix had reached an agreement with WBD on December 5, valued at almost $83 billion, for the purchase of Warner Bros. and HBO Max (at $27.75 per share), not including the Discovery Global division (CNN, TNT, TBS, Cartoon Network, Discovery Channel, Animal Planet, Food Network and HGTV).
Paramount Skydance's (PSKY) Ellison, however, refused to give up and submitted new offers to WBD, which continued to be rejected. It was not until this week, specifically on Tuesday, February 24, that PSKY presented its latest offer, reviewed by the Warner Bros. Discovery board of directors and determined as a “superior proposal” to its merger agreement with Netflix.
By the way, the “superior proposal” increases the purchase price to $31 per share in cash (previously $30 per share), raising the value of the deal to $111 billion for all of Warner Bros. Discovery (previously a deal valued at $103 billion). The deal includes the $33 billion of debt that WBD currently has.
This opened a period of four business days (as of March 4) for Netflix to present a counteroffer, of which in the end there was no need, because just a few hours later, Netflix formally declined to increase its offer for Warner Bros. Discovery.
Netflix's decision to pull out certainly surprised the industry, coupled with the fact that the streamer's co-CEO, Ted Sarandoswas in Washington DC on Thursday morning to press Trump administration officials on the deal, for which Netflix already had a merger agreement in place, amid Paramount's new $31 per share offer.
In an official statement issued jointly by Netflix co-CEOs Ted Sarandos and Greg Peters, they explained:
“The transaction we negotiated would have generated value for shareholders with a clear path to regulatory approval. However, we have always been disciplined, and at the price required to match Paramount Skydance's latest offer, the deal is no longer financially attractive, so we decline to match Paramount Skydance's offer. Warner Bros. is a world-class organization, and we want to thank David Zaslav, Gunnar Wiedenfels, Bruce Campbell, Brad Singer and the WBD board of directors for conducting a fair and rigorous process. We believe that we would have been strong stewards of Warner Bros.' iconic brands, and that our agreement would have strengthened the entertainment industry and preserved and created more U.S. production jobs, but This transaction was always something desirable at the right price, not something essential at any price.”.
And continues:
“Netflix's business is healthy, strong and growing organically, driven by our world-class programming and streaming service. This year, we will invest approximately $20 billion in quality movies and series and expand our entertainment offerings. Following our capital allocation policy, we will also resume our share buyback program. We will continue to do what we have done for more than 20 years as a public company: delight our members, drive profitable growth in our business and generate long-term value for the shareholders.”
Following Netflix's response, David Zaslav, CEO of WBD, issued a statement explaining:
“Netflix is a great company and throughout this process, Ted, Greg, Spence and everyone who works there have been extraordinary partners. We wish them the best in the future. Once our Board of Directors votes to adopt the Paramount merger agreement, tremendous value will be created for our shareholders. We are excited about the potential of a merger of Paramount Skydance and Warner Bros. Discovery and look forward to working together to tell the stories that move the world.“.
THE ELEMENTS OF THE PARAMOUNT SKYDANCE OFFER THAT CHANGED THE COURSE OF THE BIDDING WAR
- Increase in purchase price to $31 per share in cash (previously it was $30 dollars).
- Acceleration of the daily commission deadline of $0.25 per quarter to begin after September 30, 2026, until the consummation of the transaction with Paramount, instead of beginning in January.
- Increase in regulatory commission for breakup to $7,000 million of dollars in case the transaction does not close due to regulatory issues.
- He reaffirmed that will pay the $2.8 billion termination fee that WBD would be obligated to pay Netflix to terminate its current merger agreement with Netflix.
- He reaffirmed that will eliminate WBD's potential $1.5 billion financial cost associated with its debt exchange offer.
- Agreed to the obligation to provide additional equity financing to the extent necessary to support the solvency certificate required by PSKY's lending banks.
- Agreed to a definition of “Material Negative Company Effect”, meaning that the price will not be reduced if WBD's linear networks decline faster than expected before the deal closes.
There are many unknowns about how Warner Bros. Discovery will operate under Paramount ownership. Paramount's victory in the bidding almost certainly means that WBD will no longer spin off its linear cable channels into an independent company that would have been called Discovery Global. It was WBD's plan to spin off the cable channels that triggered the auction process around the studio last fall. WBD's intention to divest its linear channels was the factor that prompted Netflix to get serious about purchasing Warner Bros. and HBO.
Now, WBD's substantial collection of cable channels (including CNN, TNT, TBS, Cartoon Network, Discovery Channel, Animal Planet, Food Network y HGTV) will presumably join Paramount's existing group of linear channels headed by George Cheeks, who also oversees CBS.
At the moment, the Hollywood industry is coming to terms with the fact that one of its founding studios, Warner Bros., and the pioneering pay television brand, HBO, are about to be absorbed by another traditional studio. Given the significant overlap of operations in film and television production and programming, they will have to prepare for another large round of job losses.
By the way, David Ellison is the son of technology billionaire Larry Ellisonwho uses his personal fortune to guarantee most of the financing of the transaction, which will be done entirely in cash. Larry Ellison has been a strong supporter of President Donald Trump, a connection highlighted by his son David as a key advantage for Paramount in the regulatory review process with the Department of Justice.
The fact that Sarandos met with Trump administration officials hours before Netflix withdrew from the bid for WBD on Thursday sparked immediate speculation that the co-CEO had been warned of a tough regulatory battle by the Justice Department, which had already launched its most rigorous antitrust review, investigating whether the merger would give Netflix monopoly power over the streaming services market, as well as film and television production.
INFORMATION IN DEVELOPMENT.
Source: https://cine3.com/netflix-se-retira-compra-warner-bros-discovery-paramount/
