Netflix Shifts to All-Cash Offer for Warner Bros. Discovery Assets in Bid to Thwart Paramount

Netflix has revised its offer for Warner Bros. Discovery’s studio and streaming operations to an all-cash deal, a strategic move aimed at fending off a hostile bid from rival Paramount.

WBD announced Tuesday that its board had unanimously approved the amended offer, which will pay its shareholders $27.75 per share in cash instead of a previous mix of cash and stock. Netflix did not increase the total value of its bid, which prices the business at $82.7 billion, including debt.

In a statement, Netflix said the revised agreement would simplify the transaction’s structure, provide greater value certainty for WBD shareholders, and speed up the shareholder voting process.

To fund the larger cash component, Netflix said it increased its debt commitment from Wall Street banks to $42.2 billion from a previous $34 billion. The adjustment comes as Paramount presses forward with its hostile $30-per-share offer for all of WBD, setting the stage for a takeover battle expected to reshape Hollywood and the broader media landscape.

Paramount has threatened a proxy fight, stating it would nominate directors to WBD’s board to vote against the Netflix deal. It also filed a lawsuit seeking the disclosure of financial information related to the agreement but lost its bid for an expedited process.

The company has sweetened its own $108.4 billion offer for the entirety of WBD with a guarantee from Oracle co-founder Larry Ellison, whose son David Ellison is leading the bid as Paramount’s CEO.

The pressure on WBD has mounted from its own investors. Pentwater Capital Management, WBD’s seventh-largest shareholder, threatened last week to vote against the Netflix deal if Paramount improved its offer and WBD failed to re-engage in negotiations.

Paramount is expected to raise its offer, according to people who have discussed the matter with the company’s senior executives. However, those people added it is unclear when its next move will be made.

Alex Fitch, head of U.S. research at asset manager Harris Associates, said, “we don’t think this bidding war is over yet.” He added, “The changes show Netflix is determined to win, and the acceleration of the shareholder vote means Paramount must act with urgency.”

“It is now up to Paramount to submit a clearly superior offer if it wants to achieve its goal,” Fitch said.

WBD also released its preliminary proxy statement ahead of scheduling the shareholder vote. According to the filing, Warner’s investment bankers had estimated earlier this week that the value of Discovery’s Global Networks business — which includes CNN and would be spun off under the Netflix proposal — is between $1.33 and $6.86 per share.

Paramount had argued in its own documents that the networks division could be worth as little as $0 per share, a valuation that would leave the total value of the Netflix deal below the $30 per share it has offered.

In its proxy statement, WBD wrote that “the risk-adjusted value offered by Paramount is insufficient and not superior” when compared to the Netflix bid.