Interestingly, the filing suggests that Paramount’s intention to buy the whole company and not separate Warner Bros. and Discovery Global is a sticking point, calling the separation “a strategic priority of WBD that will afford Discovery Global enhanced strategic, operating and financial flexibility as well as opportunities for value creation for WBD stockholders.” The board also views the Paramount offer as significantly more risky for stakeholders than the Netflix offer, writing in the filing that “[t]he Offer is entirely at PSKY’s discretion – PSKY can reduce the price, impose new conditions, or walk away entirely at any time prior to its acceptance of tendered shares.” WBD also writes that Paramount’s plan would require taking on significant debt: “PSKY is a company with a $14 billion market capitalization attempting an acquisition requiring $94.65 billion of debt and equity financing, nearly seven times its total market capitalization.”
Netflix celebrated the news with a statement of its own. “The WBD Board remains fully supportive of and continues to recommend Netflix’s merger agreement, recognizing it as the superior proposal that will deliver the greatest value to its stockholders, as well as consumers, creators and the broader entertainment industry,” Ted Sarandos and Greg Peters, co-CEOs of Netflix, wrote this morning. “Netflix and Warner Bros. will bring together highly complementary strengths and a shared passion for storytelling. By joining forces, we will offer audiences even more of the series and films they love—at home and in theaters—expand opportunities for creators, and help foster a dynamic, competitive, and thriving entertainment industry.”
However, The Hollywood Reporter suggests that WBD may still be sending signals to Paramount that it’s interested in another, better offer. This morning, WBD board chair Samuel Di Piazza Jr. appeared on Squawk Box on CNBC and said that while Paramount and David Ellison “stepped up to the table” they “didn’t raise the price.” If WBD were to renege on its deal with Netflix, it would also be subject to a $2.8 billion break contract fee. “In the large majority of cases, when an overbidder comes in, they take that break fee and pay it,” the board chair said on the air, per THR. “From our perspective, they’ve got to put something on the table that is compelling and is superior.” In short: this issue is probably not even close to being put to bed.
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