Streaming merger: The Netflix logo is seen above studio offices at Sunset Bronson Studios in Los Angeles, California. Netflix has lined up additional debt from Wall Street banks to help finance its amended agreement. — AFP
LOS ANGELES: Netflix Inc reached an amended, all-cash agreement to buy Warner Bros Discovery Inc’s studio and streaming business as it battles Paramount Skydance Corp to acquire one of Hollywood’s most iconic entertainment companies.
Netflix, which previously agreed to pay US$27.75 a share in cash and stock for the Warner assets, will pay the full amount in cash, according to a filing confirming an earlier Bloomberg News report on the revised terms.
Warner Bros plans to call a special meeting of shareholders to approve the deal. Investors will vote on the transaction by April, the companies said.
Warner Bros’ annual meeting will come after that, some time in mid-year, according to a person familiar with the company’s plans.
The changes are designed to expedite a sale and address claims by Paramount that its US$30-a-share cash tender offer – for all of Warner, including cable channels like CNN and TNT – is superior.
Paramount, the parent of CBS and MTV, has been urging investors to tender their shares.
The battle for Warner Bros, known for films from Casablanca to Batman, is one of the biggest media deals in years and has the power to reshape the entertainment industry.
Paramount has been aggressively pursuing Warner Bros since September, while streaming leader Netflix emerged as a surprise suitor, entering the chase after Warner Bros put itself up for sale in October.
The new terms neutralise one of the primary criticisms from Paramount: that the stock portion of the Netflix offer makes its bid inferior.
Netflix’s shares have lost 29% since its pursuit of Warner Bros came to light. Paramount shares have also declined about 29% over that time.
The Warner Bros board “continues to support and unanimously recommend our transaction, and we are confident that it will deliver the best outcome for stockholders, consumers, creators and the broader entertainment community,” Ted Sarandos, co-chief executive officer (CEO) of Netflix, said in a statement.
Netflix said it will incur US$275mil in costs on the Warner Bros transaction this year.
Warner Bros also addressed another criticism by outlining how it values its cable networks, which would be spun off to its stockholders in a separate company called Discovery Global.
Warner Bros has spurned multiple offers from Paramount.
Its unwanted suitor has threatened to launch a proxy fight and has sued to force Warner Bros to disclose more information about the Netflix bid and the value of the cable properties.
Warner Bros’ advisers value the cable networks from as little as 72 US cents a share to as much as US$6.86 a share, according to the filing.
Paramount has claimed those properties have no value even though cable networks account for most of its own sales and profit.
Under the spinoff plans, Discovery Global would have US$17bil of debt as of June 30, 2026, decreasing to US$16.1bil by the end of the year.
Warner and Netflix also amended the agreement so that Discovery Global will have US$260mil less debt than initially planned as a result of stronger-than-expected cash flow last year.
The filing projects 2026 revenue of US$16.9bil for the new Discovery Global networks and adjusted earnings of US$5.4bil before interest, taxes, depreciation and amortisation.
The latest proposal addresses Wall Street’s concerns around Netflix’s declining share value and speeds up a shareholder vote, Bloomberg Intelligence analyst Geetha Ranganathan wrote.
It also raises the stakes for Paramount to increase its offer, something it has repeatedly refused to do.
It may take a bid of more than US$32 a share to sway the Warner Bros board at this point, she said.
Netflix has lined up more debt from Wall Street banks to help finance its amended agreement.
The company now has US$42.2bil of bridge loans in place, according to a filing, a type of facility that is usually replaced with permanent debt like corporate bonds.
A combination of Warner Bros and Netflix would marry two of the world’s biggest streaming providers, with some 450 million combined subscribers, and provide Netflix with a deep library of programming to counter challengers like Walt Disney Co and Amazon.com Inc.
Leaders of Netflix and Warner Bros were in Europe last week meeting with regulators to convince them of the merits of a deal.
David Ellison, Paramount’s CEO, has argued that a merger with his company would preserve a more traditional Hollywood structure and keep some of Warner Bros’ legacy intact.
He has posited that his all-cash offer, backed by his family trust, is financially superior and says it would have an easier time getting approved by regulators.
Ellison has been mounting an offensive of his own but has yet to convince the Warner Bros board or an overwhelming majority of the company’s shareholders.
Institutional investors are divided and have called for Paramount to increase its offer. — Bloomberg
