New unexpected chapter in the battle between Netflix and Paramount to take over the historic Warner Bros Discovery studio. The biggest object of business desire in Hollywood is considering resuming sales negotiations with which the conditions of the hostile takeover were improved, according to people close to the negotiations cited by Bloomberg.
Warner Bros. board members are debating whether it could come up with a more advantageous proposal, a move that could trigger a second bidding war with . The council has not yet decided how to respond and still has a binding agreement with Netflix, according to sources cited by Bloomberg.
Last week, Paramount presented a modification of terms that addressed several concerns of the company that, today, maintains a sales agreement with Netflix. Precisely, Paramount offered to cover the $2.8 billion that would have to be paid as compensation to Netflix if Warner Bros. terminates its agreement. In addition, it is offering to support the refinancing of Warner Bros. debt. Paramount has also assured that it will compensate Warner Bros shareholders if the deal is not closed by December 31, underscoring its confidence that the operation will quickly obtain approval from regulatory authorities. The appeal to the authorizations of the regulators is one of the assets most used by Paramount in its war against Netflix: in its opinion, it does not believe that it would easily obtain approval regarding antitrust regulations not only in the United States but in Europe.
Warner Bros. still has some concerns about Paramount’s offer, many of which it has outlined in previous statements, but this is the first time the board has considered that Paramount’s offer could lead to a better deal or prompt Netflix to increase its offer. He has also faced pressure from shareholders to at least negotiate with Paramount.
Warner Bros. has agreed to sell its eponymous studio and streaming business HBO Max to Netflix in a deal for $27.75 per share. Warner Bros. has rushed to hold a shareholder vote on its deal with Netflix, while Paramount, which owns CBS and MTV, has appealed directly to Warner Bros. shareholders with a $30-a-share takeover bid and is pressuring regulators to approve its deal.
Both Paramount and the leader in streaming Netflix have indicated that they would be willing to increase their offers to secure a deal with Warner Bros, one of the largest media companies in the United States.
Paramount CEO David Ellison has said the current offer is not its final offer, while Netflix officials have told shareholders that it could also raise its own offer. Even more so after the last movements of a rival whom they already considered won.
Both companies are cautious about spending too much. Netflix shares have fallen more than 40% from their peak in June as investors worried about the deal with Warner Bros.
Chris Marangi, co-chief investment officer of Gabelli Funds, said that while he was a little disappointed that Paramount had not raised its offer price this week, the latest changes in terms suggest the company is looking for “creative ways to structure a deal.”
“Like the Warner Bros. board, I want to see an improved offer,” said Marangi, whose company owns shares of Warner Bros. If Warner Bros. decides to negotiate again with Paramount, it would first have to notify Netflix. Warner Bros. would then try to get Paramount to increase its offer above $30 per share. If Warner Bros. decided that Paramount’s new offer was superior, Netflix would have the right to match it.
Paramount triggered the Warner Bros. auction with an unsolicited bid last year. The company raised the price several times before finally losing to Netflix. Paramount management has insisted its offer is better and has spent recent months courting regulators and shareholders. Several Warner Bros shareholders, including Pentwater Capital Management and Ancora Holdings Group, have made public their opinion that the board of directors should negotiate with Paramount.
However, only 42.3 million shares have been presented to Paramount, according to the latest count of the company’s support within Warner for its offer, which represents less than 2% of the shares in circulation.
