Talks are set to continue between Paramount and Warner Bros Discovery after the WBD board said a revised offer for Paramount could lead to a better deal for shareholders than its current deal with Netflix.
Details of the revised terms, which followed a week of talks between the two companies, were disclosed hours after WDB confirmed receipt of the offer.
They include Paramount increasing its purchase price from $30 per share to $31, plus an earlier start for a previously offered bonus $0.25 per share payable for every quarter that the deal is still being considered by regulators which will now take effect from September 30th instead of December 31st.
Additionally, it’s agreed to pay WBD a termination fee of $7 billion if the transaction does not close due to regulatory matters.
The studio, which is controlled by David Ellison, has been seeking to buy its rival since last summer, making a series of initially unsolicited offers – each of which were rejected the WBD board.
Then, in December, WBD accepted a $82.7 billion ($27.75 per share) offer from Netflix to buy its studio and streaming business, leaving shareholders with ownership of a separate business based around WBD’s portfolio of linear channels.
News of the Netflix deal, which is subject to approval by shareholders, resulted in Paramount launching a bid to buy to the business directly from WBD’s shareholders while also seeking to portray its offer as more lucrative and certain than its rival’s.
This pressure eventually led to Netflix simplifying its offer, moving from a cash and stock deal to an all-cash structure.
Paramount then moved to sweeten its own bid, offering to fund a $2.8bn termination fee WBD would have to pay if it walked away from the Netflix deal, and pledging to pay shareholders additional money for every quarter that the deal hasn’t closed beyond December 31st.
Reacting to pressure from investors, WDB agreed to enter talks with Paramount in order to give the studio a chance to set out its “best and final offer” by a deadline of midnight Monday (23rd February).
On Tuesday it emerged that a revised offer had been received but no details were initially available.
In a statement issued on Tuesday morning, Warner Bros said: “Following engagement with PSKY during the seven-day limited waiver period, we received a revised PSKY proposal to acquire WBD, which we are reviewing in consultation with our financial and legal advisors.
“We will update our shareholders following the Board’s review. The Netflix merger agreement remains in effect, and the Board continues to recommend in favor of the Netflix transaction.
“WBD shareholders are advised not to take any action at this time with respect to the amended PSKY tender offer.”
Later in the day it issued a further statement in which it said Paramount’s new offer “could reasonably be expected to lead to a “Company Superior Proposal” as defined in WBD’s merger agreement with Netflix.”
“The Board has not made a determination as to whether the revised PSKY proposal is superior to the merger with Netflix.
“WBD will engage further with PSKY to determine if a proposal that constitutes a “Company Superior Proposal,” as defined in the Netflix Merger Agreement, can be reached.
Under the terms of its deal with the WBD board, Netflix has the right to match any rival offer within 4 days.
In response, Paramount said it “welcomes the WBD Board’s determination and looks forward to continuing to engage constructively with WBD to deliver the benefits of Paramount’s proposal to WBD shareholders, the creative community and consumers.”
Parallel to the bidding, representatives from both suitors have been meeting lawmakers and competition chiefs in major markets in a bid to reassure them about the impact of the deal on customers and the wider entertainment market.
Filmmakers, unions, cinema owners and politicians have all raised concerns about the sale of Warner Bros Discovery, with some warning that the Netflix deal risks creating a company so large that it’s impossible to compete with.
Netflix has played down such concerns, repeatedly insisting that it not only competes with services such as Paramount+ and Apple TV, but also with free services such as YouTube for viewers.
Senior figures at the streamer have also sought to backtrack on years of comments calling into question the longevity and attractiveness of cinema as a means of film distribution.