Netflix Plans All-Cash Offer for Warner Bros. Studios and Streaming

The streaming landscape is set for a major shift as Netflix prepares an all-cash offer for Warner Bros. Discovery’s studios and streaming assets. Recent reports from the Wall Street Journal highlight Netflix’s strategic shift from a previously proposed combined cash and stock deal.

Details of the Offer

Initially, Netflix’s proposal involved compensating Warner Bros. Discovery shareholders with $23.25 in cash and $4.50 worth of Netflix stock for each share. This valuation placed the deal’s total enterprise value at approximately $82.7 billion. However, new developments indicate Netflix’s intention to pursue an all-cash transaction, aimed at simplifying the acquisition process.

Stock Value Implications

Netflix’s stock has seen a significant decline since the announcement of the Warner Bros. deal on December 5, dropping over 12%. As of Tuesday, Netflix shares closed at $90.32, slightly recovering by 1% on the day. Current share prices affect the original deal’s terms. Should the value drop below $97.91, the compensation would reroute from cash to Netflix stock, in a lesser exchange.

Paramount Skydance’s Competitive Bid

• Paramount Skydance is pursuing its own $30 per share all-cash bid for Warner Bros. Discovery.
• The company has initiated a lawsuit demanding disclosure of the financial specifics surrounding Netflix’s proposal.
• Paramount intends to launch a proxy fight, nominating candidates for Warner Bros. Discovery’s board to support its bid.

Market Dynamics

According to an analysis by Paramount, the current estimated value of Netflix’s offer to Warner Bros. Discovery shareholders is $27.42 per share. Paramount also asserts that the value of Discovery Global would be negligible, referencing market trends in recent spin-offs.

Financial Backing

Netflix’s original bid included substantial debt financing from notable banks such as Wells Fargo, BNP, and HSBC worth $59 billion. In contrast, Paramount Skydance has secured backing from significant investors, including Larry Ellison, co-founder of Oracle, and various sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi.

As the situation unfolds, the competition between Netflix and Paramount Skydance for Warner Bros. Discovery is intensifying, with both sides taking significant steps to advocate their proposals to shareholders. The outcome of this potential acquisition could redefine major aspects of the entertainment landscape.