The board of Warner Bros. Discovery released a statement Thursday afternoon declaring that has determined that the previously disclosed proposal from Paramount Skydance Corporation (PSKY) constitutes a “Company Superior Proposal” as defined in WBD’s merger agreement with Netflix, Inc.
WBD said it has notified Netflix of its determination that the PSKY proposal constitutes a “Company Superior Proposal.” Under the terms of the Netflix merger agreement, this notice triggers a four business day period during which Netflix has the right to propose revisions to the Netflix merger agreement so that the PSKY proposal would cease to constitute a “Company Superior Proposal.”
“Following the conclusion of this period, if the Board determines in good faith, after consultation with its independent financial and legal advisors, that, after considering any revisions to the terms of the Netflix merger agreement proposed by Netflix, the PSKY proposal continues to constitute a “Company Superior Proposal,” WBD would be entitled to terminate the Netflix merger agreement.”
The latest offer from PSKY, given to the WBD board late Monday evening at the end of a seven-day negotiating window, included a purchase price of $31.00 per WBD share in cash, plus a daily ticking fee equal to $0.25 per share per quarter beginning after September 30, 2026, as well as a $7 billion regulatory termination fee payable by PSKY in the event the transaction does not close due to regulatory matters.
Paramount also agreed to pay the $2.8 billion termination fee that WBD would be required to pay to Netflix to terminate the existing Netflix merger agreement. Larry Ellison and an associated trust also guaranteed to contribute additional equity funding to provide bridge financing that would support a solvency certificate required by PSKY’s lending banks.
The statement from the Warner Bros. Discovery board also stated that “the Netflix merger agreement remains in effect, and the Board continues to recommend in favor of the Netflix transaction and has not withdrawn or modified its recommendation.”
As part of that merger agreement, Netflix retains exclusive negotiating rights with the Warner Bros. Discovery board. So if Netflix is determined to have revised its offer enough to surpass Paramount’s last bid, Paramount will be unable to increase its offer once again.
One point of contention between the Netflix and Paramount Skydance offers is determining the proper valuation for the parts of the company Netflix would not acquire as part of the merger. Known informally as Discovery Global, it contains a number of U.S. cable television networks, the streaming platform Discovery+, as well as a substantial number of international TV channels, sports rights and other assets.
Netflix’s current offer for $27.75 per share of Warner Bros. Discovery stock values Discovery Global much higher than Paramount Skydance’s offer for the entire company. So determining which offer is the “Company Superior Offer” will likely come down to how the WBD board and its financial advisors value that part of the company.
As things stand now, the Warner Bros. Discovery board and the company’s shareholders are set to vote on the the merger with Netflix at a meeting on March 20th.
