Paramount has again raised its bid to acquire the whole of Warner Bros. Discovery.
On Tuesday afternoon, reports surfaced that Paramount had improved its offer from $30 per share to $31 per share for the entirety of Warner Bros. Discovery. Prior reports had pegged Paramount’s increase at likely jumping to $32 per share, so the formal offer is lower than previous expectations.
However, Paramount’s new offer has piled on even more sweeteners in an effort to convince the WBD board its bid is superior to WBD’s current agreement with Netflix, which agreed to pay $27.75 per share for WBD’s streaming and studio businesses while leaving the company’s cable assets to be spun out into an entity called Discovery Global. Paramount’s new offer includes a provision that it will pay WBD $7 billion should a deal be agreed upon and subsequently blocked by federal regulators. This fee is in addition to the $2.8 billion breakup fee Paramount will also cover for WBD as stipulated in its Netflix agreement.
Additionally, Paramount will include a $0.25 per share per quarter “ticking fee” to go into effect after September 30. The fee amounts to approximately $650 million paid to shareholders for each quarter the transaction isn’t approved by regulators.
A statement from WBD’s board issued on Tuesday afternoon indicates the company is taking Paramount’s new offer seriously. The board says Paramount’s updated bid “could reasonably be expected to lead to a ‘Company Superior Proposal’ as defined in WBD’s merger agreement with Netflix.”
If WBD finds Paramount’s bid to be superior to Netflix’s, Netflix would have four days to submit an improved offer of its own or walk away entirely.
To be clear, the WBD board has not yet made a formal determination about which offer it finds superior. It has simply stated that Paramount’s new bid could “reasonably” be found superior, and therefore trigger the four-day period for Netflix to counteroffer.
It’s unclear if Paramount’s $1 per share increase will be enough to fend off Netflix. Recently, MoffettNathanson analyst Robert Fishman posited that Paramount would have to up its bid to $34 per share to fend off Netflix once and for all. Conversely, Fishman noted that a modest bump, as the $1 increase would constitute, could see Netflix attempt to match.
The fate of Warner Bros. Discovery will in turn determine the fate of TNT Sports. A deal with Netflix would see the sports division included in Discovery Global along with other declining cable assets, at which point further transactions would be highly likely. A deal with Paramount would see TNT Sports folded into CBS Sports, combining two of the most prominent sports brands on television into one entity, with a rights portfolio that would rival ESPN’s.
A decision could come to a head next month, before WBD holds a special shareholder meeting on March 20 that is currently setup to recommend voting to approve the Netflix deal.
About Drew Lerner
Drew Lerner is a staff writer for Awful Announcing and an aspiring cable subscriber. He previously covered sports media for Sports Media Watch. Future beat writer for the Oasis reunion tour.