Warner Bros. Discovery reopens deal talks with Paramount
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Warner Bros. Discovery on Tuesday said it will reopen deal talks with Paramount Skydance, possibly reigniting a bidding war with Netflix.
Why it matters: Paramount has made numerous revisions in an attempt to get WBD's board to take its offer seriously. By holding out for a "best and final offer," it looks like WBD may be able to get Paramount to lift its price to at least $31 per share.
State of play: WBD says it will continue to recommend that shareholders vote in favor of its deal with Netflix, but said Netflix has provided a limited waiver allowing it to engage in discussions with Paramount for a seven-day period ending on Feb. 23.
- The discussions, WBD says, are "to seek clarity for WBD stockholders" and provide Paramount "the ability to make its best and final offer."
- During the discussion period, WBD says it will discuss with Paramount "the deficiencies that remain unresolved and clarify certain terms of PSKY's proposed merger agreement.
- Netflix, it notes, retains its matching rights as defined by the merger agreement.
What they're saying: "Throughout the robust and highly competitive strategic review process, Netflix has consistently taken a constructive, responsive approach with WBD, in stark contrast to Paramount Skydance (PSKY)," Netflix said in a statement.
- "While we are confident that our transaction provides superior value and certainty, we recognize the ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY's antics," it said.
- "Accordingly, we granted WBD a narrow seven-day waiver of certain obligations under our merger agreement to allow them to engage with PSKY to fully and finally resolve this matter."
Catch up quick: Last week, Paramount revised its offer to cover a $2.8 billion termination fee that WBD would owe Netflix if it terminated the current agreement, but it didn't raise the price of its $30-per-share bid.
- It also said it would cover a potential $1.5 billion in debt refinancing costs and would provide WBD shareholders with a 25-cent-per-share ticking fee for every quarter the deal doesn't close beginning next January,
- In response to those revisions, activist investor Ancora Partners disclosed a roughly $200 million stake in WBD and said it strongly opposed its deal with Netflix because Paramount's bid was stronger financially and offered regulatory certainty.
In a regulatory filing Tuesday, WBD said a "senior representative" for Paramount's financial advisor informed a WBD board member that if WBD authorized discussions with Paramount, Paramount would agree to pay $31 per share.
- The company sent a letter to Paramount's board Tuesday noting that because the new share price was not reflected in Paramount's latest merger proposal last week, WBD's board was left "with vague assurances of intention."
- "We are engaging with PSKY now to determine whether they can deliver an actionable, binding proposal that provides superior value and certainty for WBD shareholders through their best and final offer," WBD president and CEO David Zaslav said in a statement.
What's next: WBD said it will hold a special meeting for shareholders to vote on its merger agreement with Netflix on March 20 at 8am ET.
