The Netflix-Paramount-Warner Bros. Three-Way Drama Just Keeps Heating Up

Key Takeaways

• The latest twist in the high-stakes battle to acquire Warner Bros. Discovery sets a timer for Paramount to outbid Netflix, which has a deal worth $72 billion in cash.
• Paramount’s restarted deal talks with Warner may set the stage for a further bidding war.

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A major media deal in the making has delivered another twist.

Warner Bros. Discovery (WBD) on Tuesday restarted talks with Paramount Skydance (PSKY), giving the rival suitor seven days to produce a “best and final offer” good enough to make it walk away from its deal with Netflix (NFLX). Though Warner’s board continues to recommend the latter merger, the move to renenage with Paramount shows that the high-stakes battle between media giants isn’t over.

The latest wrinkle in the months-long jousting for the prize—premium media brands like HBO and DC Studios—follows on the heels of Paramount informally dangling its own offer, multiple bids aimed at assuaging Warner Bros.’ concerns, and a hostile takeover attempt. Shares of Paramount are up more than 5% Tuesday morning, while Warner Bros. shares have risen 2% as broad market indexes inch lower. Netflix’s stock is down more than 1%.

WHY THIS MATTERS TO YOU

Consumers watching to see if the Warner and Netflix make it down the aisle may wonder what’s next for streaming costs after someone else acquires Warner Bros. Discovery—though even without a merger, the trend has been upward.

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Paramount, led by Larry Ellison’s son David, has formally offered $30 per share for Warner, but deal talks only reopened after a senior representative from Paramount recently informed a Warner Bros. board member that it agree to pay an additional dollar per share if the company’s board would authorize a formal discussion; the person also said that that figure was not Paramount’s “best and final” proposal, according to Warner Bros. filings.

Now the ball is in Paramount’s court. “We are writing to inform you that Netflix has agreed to provide WBD a waiver of certain terms of the Netflix merger agreement to permit us, through February 23, to engage with PSKY to clarify your proposal, which we understand will include a WBD per share price higher than $31,” Warner Bros. CEO David Zaslav said in a letter to Paramount included in Tuesday’s filings.

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Netflix in December offered $27.75 per share in cash for Warner Bros.’ TV and film assets excluding its traditional media TV networks, the latter of which Warner Bros. has plans to spin off into a separate entity. Paramount’s last formal offer was $30 per share for the whole company, including CNN, and it agreed last week to pay Warner Bros. Discovery the $2.8 billion break-up fee the company would owe Netflix if their agreement was terminated, plus back debt costs, according to filings.

Paramount further agreed to also pay Netflix shareholders 25 cents a share, or roughly $650 million in cash, for every quarter that the deal didn’t close starting next year, filings show. (One of its main arguments for why Paramount thinks its offer is superior is that it is more likely to get regulatory approval.)

Warner Bros.’ board said that Netflix offer remains “in the best interest of WBD shareholders,” according to the company. It on Tuesday filed and started mailing out proxy statements for a special meeting on March 20, when shareholders would affirm or deny the board-recommended match.

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