Paramount Skydance has sweetened its takeover offer to the Warner Bros. Discovery Board by proposing $31 a share in cash plus a daily ticking fee of $0.25 per share for every quarter beyond October 1 that a deal is not consummated.
Also included in the offer is a $7 billion regulatory termination fee that Paramount would have to pay if the deal is squelched by regulatory roadblocks. Paramount had originally proposed $5.8 billion for this eventuality. Paramount would also have to pay a fee of $2.8 billion to terminate any deal with Netflix.
The Warner board responded by saying this could be a “Company Superior Proposal.”
Warner Bros. has emphasized, however, that the board has not yet decided whether the revised proposal is indeed “superior” to the Netflix merger. If the board does agree it is a superior proposal, that would mean that Netflix would have four business days to offer any revisions to its own proposal. At the moment, Warner’s board still favors the Netflix deal.
As of Wednesday evening, Netflix had declined to comment on these developments, but Paramount issued a statement in which it declared that 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.”
Netflix and Paramount are actually bidding for different sets of assets. Paramount’s $31 per share offer is for the entire company, while Netflix’s $27.75 per share offer is only for the movie and television studios, plus its catalog and HBO Max streaming service. Warner Bros. wants to spin off its TV division into Discovery Global, which would function as a separate company. According to Warner Bros., Discovery Global could be valued at between $1.33 and $6.86 per share.
Commenting on these developments, Matthew Dolgin, a senior equity analyst at Morningstar, said “We expect shareholder lawsuits if Netflix is the ultimate winner, and because the deals are not apples to apples—with the suitors not vying for identical assets and other details surrounding the respective bids requiring discretion—determination of which deal is better will always be subjective.”