Netflix revealed Tuesday morning that it had struck an amended all-cash deal to purchase Warner Bros. Discovery’s streaming and studio assets, replacing the previous stock-and-cash agreement the two companies had reached last month.
The new bid, which was reported last week as in the works, comes as the streaming giant was prepared to report its earnings Tuesday. Netflix’s share price has been significantly down since the company’s previous earnings report last fall, which showed slowing subscriber growth, and has only continued to tumble following the WBD merger announcement last month.
Meanwhile, the sweetened offer from Netflix eliminates the $4.50 stock equity component, leaving the per-share offer at $27.75. This revision takes the concerns over the value of WBD’s cable assets – which will be spun off into a separate company named Discovery Global – largely off the table.
This move also likely places additional pressure on Paramount Skydance chief David Ellison, who is in the midst of a hostile takeover attempt of Warner after his all-cash offer of $30 per share, which would include WBD’s cable and TV assets, was repeatedly rejected by the company’s board of directors.
Ellison recently filed a lawsuit seeking to force WBS to divulge additional financial information about its Netflix deal, centering much of his argument on the perceived value of the soon-to-be spun-off Discovery. According to Ellison, the cable assets – which Paramount would acquire in its offer – are essentially worthless, making his offer for the studio giant far more lucrative to Warner Bros. shareholders.
A Delaware judge, however, rejected Paramount’s motion to expedite a trial last week, saying the company had failed to show it would “suffer irreparable harm” due to the supposed lack of disclosure by WBD.
“Today’s lawsuit by Paramount Skydance was yet another unserious attempt to distract and the Judge saw right through it,” Warner Bros. Discovery said in a statement at the time. “Despite its multiple opportunities, Paramount Skydance continues to propose a transaction that our board unanimously concluded is not superior to the merger agreement with Netflix.”
The revised deal, which has already been approved by the WBD board, should allow Warner shareholders to vote on the agreement by April, according to the two companies. The amended structure could also sway some shareholders who were leaning towards pushing WBD to accept the Paramount deal.
“Discovery will likely become the focal point of the battle for WBD going forward, as the value of the ‘stub’ company is now the sticking point when it comes to which offer is truly the better deal: Netflix’s bid for WB and a share of Discovery, or Paramount’s bid for the whole thing,” The Hollywood Reporter’s Alex Weprin reported.
In an SEC filing released Tuesday, Warner Bros. laid out an estimate of Discovery Global’s value, all while comparing it to Versant – the recently spun-off company from Comcast that is largely comprised of NBC Universal’s cable channels, including CNBC and MS NOW (previously MSNBC).
According to the filing, Discovery Global – which would include CNN, TBS, TNT Sports and other digital outlets – could have a share value as low as $1.33 and as high as $6.86. Paramount, meanwhile, has argued that Discovery could be valued as low as $0 a share when compared to the performance of Versant, which went public earlier this month.
CNN, however, has shown better-than-anticipated financial projections, with Warner forecasting that the cable news pioneer will bring in $1.8 billion in revenue this year and $2.2 billion in 2030, according to the latest company filing.
Prior to Tuesday’s opening bell, Netflix was expected to report fourth-quarter earnings of 55 cents per share and revenue of $12 billion, both up significantly from a year ago. However, according to data compiled by Bloomberg, analysts projected slowing revenue growth for Netflix over the next three quarters before another jump up in 2027.
“By amending our agreement today, we are underscoring what we have believed all along: not only does our transaction provide superior stockholder value, it is also fundamentally pro-consumer, pro-innovation, pro-creator and pro-growth,” Netflix co-CEO Greg Peters said in a statement on Tuesday.
“Our revised all-cash agreement demonstrates our commitment to the transaction with Warner Bros and provides WBD stockholders with an accelerated process and the financial certainty of cash consideration, while maintaining our commitment to a healthy balance sheet and our solid investment grade ratings,” he added.
“Today’s revised merger agreement brings us even closer to combining two of the greatest storytelling companies in the world and with it even more people enjoying the entertainment they love to watch the most,” Warner Bros. Discovery chief David Zaslav noted in his own statement.
Meanwhile, the one wild card throughout this entire saga is President Donald Trump, who has said he will be heavily involved in approving the WBD purchase and has weighed in publicly throughout the process.
Ellison, whose hostile takeover is largely backed by his ultra-wealthy father (and close Trump ally) Larry Ellison, has suggested that he has a “Trump card” in his back pocket in his bid to make Warner Bros. part of his burgeoning media empire. Trump has also repeatedly praised Ellison as a “great” and “amazing” person while cheering on his leadership of Paramount.
Having already made CBS News “MAGA-friendly” since his Trump-approved purchase of Paramount last year, Ellison has reportedly promised the president he’d make “sweeping changes” at CNN – which Trump has long called “fake news” – once he acquired Warner Bros. Discovery.
At the same time, the president has also lauded Netflix co-CEO Ted Sarandos as a “fantastic man” and has met with the streaming executive multiple times at the White House. It was revealed this month that Trump recently purchased corporate bonds from Netflix and Warner Bros. Discovery.
Still, that hasn’t stopped the president from recently sharing a month-old article from Trump-boosting outlet One America News that called for the cancellation of Netflix’s “cultural takeover” of Warner because the streaming giant is a “woke media monopoly.”
Speaking to the New York Times last week, Sarandos said he didn’t “know why he would have done that” when asked about the president’s social media post, adding that “no conversation we ever had was about any of the things that were in that article that he posted.” In the end, though, Sarandos said he did not “want to overread it, either.”
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