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Netflix Inc. (NFLX) revised its bid for Warner Bros. Discovery Inc. (WBD) to an all-cash transaction and priced each share at $27.75. The companies said Tuesday the change simplifies the structure and speeds up the Warner Bros. shareholder vote.
The move adds pressure in a fight with Paramount Skydance (PSKY), which has launched a hostile takeover bid. Meanwhile, Warner Bros. plans to split into two public companies, including a spin-off of Discovery Global.
Netflix informed that it will pay a fixed $27.75 per WBD share in cash under the amended merger agreement. The companies said the revision offers Warner Bros. stockholders more value, certainty, and a quicker path to a vote.
The new terms replace Netflix’s earlier cash-and-stock package. Reuters reported the prior mix offered $23.25 in cash and $4.50 in Netflix stock, and it implied an $82.7 billion enterprise value, including debt.
However, Netflix shares have fallen almost 15% since the merger announcement on December 5, Reuters reported. This decline pushed the stock below the $97.91 floor price tied to the original offer’s stock component.
Reuters reported Netflix shares rose about 1% in early trading, while WBD shares slipped slightly.
Warner Bros. said investors will also receive shares of Discovery Global after the separation. The spin-off will include CNN, TNT Sports, and the Discovery+ streaming service.
The company expects to complete the separation in six to nine months. Warner Bros. said it expects to finish the split before the Netflix transaction closes.
Warner Bros. disclosed valuation work for Discovery Global in a Tuesday filing, with estimates ranging from $1.33 to $6.86 per share. Warner Bros. has said the retained stake helps make the Netflix deal more attractive, while Paramount has argued the cable spin-off holds little value.
In addition, Netflix agreed to allow Warner Bros. to reduce debt assigned to Discovery Global by $260 million, Reuters reported. The companies expect the merger to close 12 to 18 months after the original merger agreement.
Paramount Skydance has tried to counter the Netflix all-cash offer for Warner Bros Discovery with a $30-per-share cash bid for the full company. Reuters reported Paramount values that proposal at $77.9 billion and has mounted a public campaign to persuade shareholders.
The rival bidder has also said it would name its own slate of directors. Paramount has urged investors to view its bid as superior.
Furthermore, Paramount filed a lawsuit in the Delaware Chancery Court seeking disclosures on how Warner Bros. values the competing offers. Reuters reported a judge rejected an expedited request, finding Paramount failed to show irreparable harm.
Paramount’s tender offer expires January 21, Reuters reported. Warner Bros. has repeatedly urged shareholders to back the Netflix sale of its studio and streaming assets and has rebuffed Paramount’s overtures.
Harris Oakmark portfolio manager Alex Fitch, whose firm held about 96 million WBD shares as of September 30, said the bidding war “may not be over.” Fitch said the revised cash terms increase pressure on Paramount to present a clearly superior offer.
Warner Bros. also highlighted financing and credit in its filings. The company said Netflix holds an investment-grade credit rating, while Standard & Poor’s (S&P) rates Paramount bonds at junk levels.
Reuters reported Netflix has a market valuation of about $402 billion, compared with about $12.6 billion for Paramount. Warner Bros. said a Netflix deal would leave roughly $85 billion in debt, versus about $87 billion under a Paramount scenario, and it would carry a leverage ratio under four, compared with about seven.
Still, lawmakers across the political spectrum have raised concerns about media consolidation, Reuters reported. Netflix said Warner Bros. expects to hold a special investor meeting by April to vote on the deal, as regulators review the transaction and the companies work toward closing.
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