Netflix has room to raise its Warner Bros bid: Reuters report

CALIFORNIA: Netflix has ample firepower to raise its bid for Warner Bros Discovery if rival suitor Paramount Skydance sweetens its offer, setting the stage for a high-stakes auction over one of Hollywood’s richest catalogues, Reuters reported.

The battle has pitted two media heavyweights against each other for control of franchises ranging from Harry Potter and Game of Thrones to DC Comics and Superman. While Warner Bros is pressing ahead with a 20 March shareholder vote on its deal with Netflix, the board has granted Paramount a narrow window to submit what it calls a “best and final” proposal.

Netflix has agreed to pay $27.75 a share, valuing Warner’s studio and streaming operations at about $82.7 billion. Paramount, by contrast, has offered $30 a share, or $108.4 billion, for the entire company, including Discovery Global, home to CNN, HGTV and other legacy television assets.

On Tuesday, Warner Bros rejected Paramount’s latest hostile bid but stopped short of closing the door. The rival studio had informally floated a $31-a-share proposal, prompting the board to re-engage while reaffirming its backing for the Netflix transaction.

“Netflix still looks to be in the driving seat, but that can quickly shift,” said Hargreaves Lansdown senior equity analyst Matt Britzman. “Price will likely be decisive. Funding certainty and regulatory risk matter, but at a high enough number they become secondary.”

He added that the bids are not directly comparable, with Netflix leaving behind the traditional network business: a trade-off the board and shareholders must ultimately price.

Paramount said it would press ahead with its tender offer, oppose what it called an “inferior” Netflix deal and push to nominate directors at Warner’s upcoming annual meeting. Under the merger agreement, Netflix is entitled to match any improved bid.

In a letter to Paramount’s board, Warner Bros chairman Samuel DiPiazza Jr and chief executive David Zaslav said the company remained “fully committed” to the Netflix transaction.

Behind the scenes, board-level concerns have tilted the balance. Eisner Advisory Group partner Paren Knadjian, said questions over financing structure, timing and regulatory approval continued to weigh on Paramount’s proposal, regardless of headline valuation.

Paramount has attempted to bridge the gap by offering Warner shareholders additional cash for every quarter the deal fails to close after this year, and by agreeing to cover the $2.8 billion break fee payable to Netflix if Warner walks away. The board, however, said key issues remain unresolved, including exposure to a potential $1.5 billion junior lien financing fee, execution risk if debt funding collapses, and whether equity backing led by Larry Ellison is fully committed.