Paramount Skydance has increased its offer to buy Warner Bros Discovery, prompting the company to reconsider its existing agreement with Netflix and opening the door to further negotiations between the parties.
Warner Bros said Paramount agreed to raise its bid by $1 per share, creating an offer the board said “could reasonably be expected to lead to a superior proposal.” The company said it would enter further talks before deciding whether to walk away from the deal it reached with Netflix in December.
The Competing Offers
Under the revised terms, Paramount has offered to pay $31 per share in cash, with additional payments if the transaction is delayed. Paramount also agreed to pay $7 billion if the deal fails and to cover the $2.8 billion fee Warner Bros would owe Netflix if it breaks its existing merger agreement.
Netflix, which has four days to submit a counter-offer, did not immediately comment. In a recent interview with the BBC, Netflix co-chief executive Ted Sarandos declined to say whether the company would engage in a bidding contest. He said the company liked its current deal and described the negotiations as a process of price discovery.
The Existing Netflix Agreement
In December, Warner Bros said it had agreed to sell its film and streaming businesses, including HBO, to Netflix for $27.75 per share, valuing the deal at about $82 billion including debt. Under that plan, Warner Bros would spin off the rest of its operations, including its traditional television networks and CNN, into a separate company.
Paramount, backed by Larry Ellison and led by his son David Ellison, has pursued Warner Bros since last year as part of an effort to expand its position in the entertainment industry. Earlier proposals were rejected. Paramount had previously floated an offer of $30 per share to acquire the whole company, but this is the first time it has formally agreed to pay more.
Board Review And Political Scrutiny
Warner Bros said its board has not yet made a final decision and will continue discussions to see whether a transaction that qualifies as a superior proposal can be reached.
Both bids have drawn attention from lawmakers, who have raised concerns about market concentration and the effects on the wider entertainment sector. During a hearing in Washington earlier this month, Sarandos was questioned about possible price increases and the future of movie theaters. The Ellison family’s ties to the Trump administration have also drawn scrutiny from Democrats.
Market Expectations
Before Paramount’s higher offer was disclosed, Luke Stillman, managing director at the U.S. media and advertising consultancy Madison and Wall, said he believed Warner Bros was seeking to trigger a bidding contest and that the final price could reach $33 per share.
Featured image credits: Flickr
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