The Wall Street Journal reports that Netflix is preparing an all-cash deal to acquire Warner Bros. Discovery’s streaming and studio businesses.
Under the terms of Netflix’s original agreement, each Warner Bros. Discovery shareholder will receive $23.25 in cash and $4.50 worth of Netflix common stock for each outstanding share of WBD common stock at closing. Considering these parameters, the transaction has an enterprise value of $82.7 billion.
Netflix is now willing to switch to an all-cash offer, the magazine reported, citing unnamed sources. Bloomberg News previously reported that Netflix was considering such a move.
A representative for Netflix declined to comment. A WBD spokesperson referred inquiries to Netflix.
Netflix’s reported changes to the terms of its deal come as David Ellison’s Paramount Skydance continues to make the case to shareholders why its hostile $30-per-share all-cash takeover offer is better than the Netflix deal. Paramount filed a lawsuit against WBD on Monday demanding disclosure of financial details of its deal with Netflix, including how WBD is valuing the proposed Discovery Global Cable TV Network spinoff. Paramount has also formally announced the start of a proxy fight and plans to elect its own WBD director nominees to support Paramount’s bid at Warner Bros. Discovery’s annual shareholder meeting.
Netflix’s stock price has fallen more than 12% since the Warner Bros. deal was announced on December 5th, below the $97.91 per share “collar” in the WBD deal that would reduce the total amount of the deal. (In that case, under the terms of the original agreement, WBD shareholders would receive 0.0460 Netflix shares for each WBD share, rather than Netflix shares worth $4.50 per WBD share.) Netflix stock closed Tuesday at $90.32 per share, up 1% on the day.
Taking into account the drop in Netflix’s stock price, Netflix’s total transaction to WBD shareholders would be $27.42 per share, according to Paramount’s Jan. 8 analysis. Paramount Skydance argues that Discovery Global stock will be worthless based on analysis compared to Comcast’s recent Versant spinoff.
Under the Netflix and WBD deal, the streaming giant will acquire Warner Bros.’ film and television studios, HBO and HBO Max, and its gaming division. Netflix’s original bid included $59 billion in debt financing from Wells Fargo, BNP and HSBC.
Meanwhile, Paramount Skydance, backed by David Ellison’s father and Oracle co-founder Larry Ellison, as well as partners including Redbird Capital Partners and sovereign wealth funds from Saudi Arabia, Qatar and Abu Dhabi, is proposing a full acquisition of Warner Bros. Discovery.
