The race to acquire Warner Bros Discovery is heating up as Paramount Skydance raises its offer to $31 per share in cash.
The move reopens the door to negotiations after Warner’s board received signals that the new offer may be more attractive than the previous proposal.
The bidding war for the studio behind big franchises like Batman and Harry Potter is now entering a critical phase, with Netflix’s position as the preferred candidate beginning to be questioned.
Paramount previously brought Warner back to the negotiating table by proposing a higher cash offer to shareholders.
In the latest revision, Paramount also increased the deal’s termination fee to $7 billion from $5.8 billion previously if the deal fails to gain regulatory approval.
In addition, Paramount agreed to pay Warner shareholders 25 cents per share per quarter for each quarter after September 30 if the deal is still pending.
The company is also prepared to add equity if banks raise concerns about its ability to finance the deal once it closes.
Warner's board said it had not yet decided whether Paramount's new offer was better than the proposed merger with Netflix.
However, further discussions will continue. If a more competitive offer is made, Netflix will be given four business days to submit a counteroffer.
The two parties' bid structures differ. Paramount is offering $31 per share for the entire company. Netflix is offering $27.75 per share in cash, or about $82.7 billion including net debt, for its core assets, including its film and television studios, content catalog and HBO Max streaming service.
Warner plans to spin off its television division into a new, separately listed entity, known as Discovery Global. The actual value of Netflix's offer depends on Discovery Global's debt level and market valuation after it goes public.
Warner's board estimates Discovery Global could be worth between $1.33 and $6.86 per share. If the valuation is achieved, the total return to shareholders could potentially exceed Paramount's initial offer of $30 per share.
Overall, the bidding war involves not only the offer price, but also the transaction structure, financing risks and the potential future value of the assets to be separated.
The market is now awaiting the decision of the Warner board of directors, which will determine the direction of one of the largest deals in the global entertainment industry.
