Warner Bros. Sale to Netflix instead of Paramount seems increasingly more likely, with a message from the board of directors urging shareholders to take Netflix's offer. Netflix and Paramount both have a lot to gain from the acquisition deal, but Warner Bros. Discovery's board clearly feels that Netflix is the superior choice.
On December 5, Netflix announced a deal with Warner Bros Discovery that would add the acquired company's film, television, and game studios, along with streaming services to its list of assets, with the potential of uniting Netflix's streaming service with rival HBO Max. With an enterprise value of $82.7 billion and an equity value of $72 billion, this deal was announced to include a definitive agreement having reportedly been reached. But just three days after Netflix's announcement, Paramount Skydance countered with an aggressive proposal of its own, offering a much larger sum of roughly $108.4 billion for the acquisition of Warner Bros. Discovery's assets.
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Warner Bros. Discover Board Supports Selling to Netflix, Not Paramount
While the larger offer may seem more attractive on paper, the board of directors at Warner Bros. Discovery is fully united in supporting Netflix, declaring on its official website that its members unanimously recommend shareholders reject the offer from Paramount Discovery. According to an official statement posted there, the offer from Paramount "is not in the best interests of WBD and its shareholders and does not meet the criteria of a 'Superior Proposal' under the terms of WBD's merger agreement with Netflix." While this declaration does not automatically cancel out the potential for Paramount Skydance to acquire Warner Bros. Discovery, it sends a strong message to shareholders that the board would be united against such an action.
And that is meant literally. The website states that the board has sent its shareholders copies of a lengthy letter declaring its unanimous support for Netflix's offer, declaring in bold text, "The terms of the Netflix merger are superior." The text of this letter highlights several potential risks of selling to Paramount Skydance, which include claims that Paramount Skydance has "consistently misled" shareholders into believing that its potential deal has full backing from Ellison family, which includes Oracle co-founder Larry Ellison. Instead, the letter states that the Ellison family has not agreed to provide a financial backstop for its deal, while Netflix's offer includes fewer worries, including no need for any equity financing, and it does not pose a risk based on "robust debt commitments."
There are numerous other potential risks and problems detailed throughout the letter, including that were Warner Bros. Discovery were to back out of its deal with Netflix, it would owe Netflix a $2.8 billion termination fee; a fee which Paramount Skydance has reportedly not offered to finance. It also reiterates that Paramount Skydance had tried to acquire Warner Bros. Discovery through six different submitted proposals prior to Warner Bros. Discovery entering into its deal with Netflix, all of which were found by the board to be inferior to Netflix's offer.
There are a lot of big IP franchises up for grabs for whichever company potentially acquires Warner Bros. Discovery. These include the rights to some of DC's best superheroes, including Batman, Superman, and Wonder Woman, which could provide a big boon for Netflix, considering its history of hosting its own original brand of Marvel superhero shows. Control of some major fantasy franchises are on the table as well, including Game of Thrones and Harry Potter. Additionally, Warner Bros. Discovery's assets include some top-name sitcoms like Friends and The Big Bang Theory, the latter of which could be united with its prequel series, Young Sheldon, on a single platform if Netflix is able to close the acquisition deal.