Warner Bros. Discovery (WBD) is urging its shareholders to reject a hostile takeover offer from Paramount Skydance (PSKY) and accept a “superior” proposal from Netflix (NFLX).
The board of directors at Warner Bros. has unanimously recommended the takeover bid from Netflix, which is a cash-and-stock offer valued at $72 billion U.S.
The Netflix offer includes the streaming and studio assets of Warner Bros. and has an enterprise value of $83 billion U.S., including debt.
Under terms of the Netflix deal, Warner Bros. Discovery’s portfolio of cable networks would be spun out into a separate publicly traded company.
Paramount Skydance has launched a hostile bid for Warner Bros., taking a $30-per-share, all-cash offer directly to shareholders.
Paramount Skydance has argued that its deal, which equates to an equity value of $108.4 billion U.S., is better than the offer from Netflix.
Additionally, a Paramount-Warner Bros. combination would have better chances of winning regulatory approval in the U.S., argues management at Paramount Skydance.
However, Warner Bros’ board says that the Paramount bid comes with “significant risks and costs imposed on our shareholders.”
Warner Bros. says that the Paramount bid includes more than $40 billion U.S. of financing that is not guaranteed despite claims that the funding has a “full backstop.”
The board at Warner Bros. said that “Netflix made a compelling offer — it was heavy in cash, certainty of close, a high termination fee, and they responded to the operating issues that we were concerned about.”
Netflix on Wednesday said it “welcomes” the Warner Bros. Discovery board’s recommendation.
Whichever company succeeds in buying Warner Bros. Discovery, they will get a film studio, the HBO Max streaming service, and popular entertainment titles ranging from Harry Potter to The Sopranos, as well as D.C. Comics characters Batman and Superman.
WBD stock is up 171% this year, due largely to the takeover battle, and trading at $28.90 U.S. per share.
