Warner Bros. Sale: Paramount Raises Bid, Netflix Deal in Doubt

Warner Bros. Discovery is once again weighing a potential takeover by Paramount Global, after receiving a waiver from Netflix to re-engage in discussions, the company disclosed in a Tuesday regulatory filing. The move allows Paramount seven days to present a “best and final” offer, as Warner simultaneously continues to back a separate deal with Netflix.

The unexpected reopening of talks comes after months of complex negotiations and competing bids for the future of the entertainment conglomerate. Warner Bros. Discovery had initially agreed to a $72 billion deal with Netflix for its studio and streaming assets, including HBO Max, but Paramount responded with a $77.9 billion all-cash offer for the entire company, including networks like CNN, and Discovery. Paramount’s bid, currently valued around $108 billion including debt, went directly to Warner shareholders in a hostile takeover attempt.

Netflix granted Warner Bros. Discovery the waiver to entertain Paramount’s revised offer, acknowledging the disruption caused by Paramount’s pursuit. “Netflix is confident that its proposed transaction provides superior value and certainty,” the streaming giant said in a statement, but added it had granted the waiver to “finally resolve this matter” and recognized “the ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY’s antics.”

Warner Bros. Discovery’s board continues to recommend shareholders approve the Netflix merger, with a special meeting scheduled for March 20 to vote on the deal. However, the company will use the next seven days to assess whether Paramount can improve its offer to a level that warrants consideration. According to a Tuesday disclosure, Paramount has indicated it would raise its offer to $31 per share if engaged in discussions.

Paramount characterized Warner’s decision to impose a deadline as “unusual,” arguing that the company could have evaluated its offer without a time constraint. Nevertheless, Paramount stated it is “nonetheless prepared to engage in solid faith and constructive discussions.” The company is as well continuing to pursue its tender offer of $30 per share, and a proxy fight to install its own slate of directors at Warner.

Analysts at Raymond James believe Paramount is willing to increase its offer further, potentially to $32 or $33 per share, which would develop it “increasingly difficult to argue the Netflix agreement is superior.” They note that Netflix could then respond by matching the higher bid.

Paramount has recently attempted to sweeten its offer with additional incentives, including a “ticking fee” of 25 cents per share for every quarter the deal remains uncompleted after December 31, totaling $650 million. The company has also pledged to cover Warner’s $2.8 billion breakup fee owed to Netflix if the merger agreement is terminated.

Despite Paramount’s efforts, its tender offer has seen a decline in shares tendered. As of last week, approximately 42.3 million Warner shares had been tendered, down from over 168.5 million in January, representing a small fraction of Warner’s total outstanding shares. Activist investor Ancora Holdings has also publicly opposed the Warner-Netflix merger.

The potential sale of Warner Bros. Discovery has raised antitrust concerns among lawmakers globally, who are calling for regulators to carefully scrutinize any merger of this magnitude. The U.S. Department of Justice has already initiated a review, and other countries may follow suit. Both Paramount and Netflix have received securities clearance from German authorities.

Shares of Warner Bros. Discovery rose more than 3% in Tuesday trading, whereas Paramount Skydance climbed over 5%, and Netflix’s stock saw a slight increase.