“Netflix is making a significant change to its $83 billion deal for Warner Bros. The streaming giant said Tuesday that it was amending its bid to make it an all-cash deal, eliminating the $4.50 in Netflix stock that had been part of its original winning offer. The move will apply pressure to David Ellison’s”, — write: www.hollywoodreporter.com
The streaming giant said Tuesday that it was amending its bid to make it an all-cash deal, eliminating the $4.50 in Netflix stock that had been part of its original winning offer. The move will apply pressure to David Ellison’s Paramount, which has been arguing that its $30 per share all-cash offer is clearly superior.
With the tweak, Netflix is now offering $27.75 in cash for WB, leaving Discovery Global as its own standalone company.
Discovery will likely become the focal point of the battle for WBD going forward, as the value of the “stub” company is now the sticking point when it comes to which offer is truly the better deal: Netflix’s bid for WB and a share of Discovery, or Paramount’s bid for the whole thing.
In a proxy filing Tuesday, WBD outlined what it believes the value of a standalone Discovery Global to be, outlining a menu of possibilities for Discovery’s stock as a standalone, from a low of $1.33 per share to a high of $6.86 per share.
The “selected public companies analysis on a whole company basis indicated an approximate implied equity value reference range for Discovery Global of $1.33 to $3.24 per share,” while the “selected public companies sum-of-the-parts analysis indicated an approximate implied equity value reference range for Discovery Global of $2.41 to $3.77 per share.” That would be the Versant comp.
Paramount argued in a filing earlier this month that Discovery should effectively be valued at $0 to perhaps $0.50 per share when comparing it to the stock performance of Versant.
However, WBD’s board noted that the potential for future acquisition deals suggested that “on a selected transactions analysis, which indicated an approximate implied equity value reference range for Discovery Global of $4.63 to $6.86 per share.”
Paramount argues that the value, whatever it ends up being, is certainly less than the $30 per share it is offering, alongside what it argues is a cleaner and faster regulatory path.
WBD also said that, at the time it cut the Netflix deal it received “an illustrative approximate implied equity value reference range for Discovery Global of $0.42 to $2.09 per share,” but that improved performance since then and more precise calculations led to the upward revisions in Tuesday’s filing.
Ellison took WBD to court this month, seeking to gather more data about the potential spin, including details on how the company valued Discovery, and how it came to that conclusion. He also threatened a proxy fight, and Tuesday’s filing confirmed that WBD will hold a special shareholder meeting at which the deal will be the focus.
That means that if Paramount follows through on its threat to wage a proxy battle, it will need to convince shareholders to reject the deal at the special meeting, the date of which has not yet been set.
Still, executives at Netflix and WBD argued that the revised deal (done in part due to better-than-anticipated financial performance at Discovery) will give it a faster path to closing.
“Today’s revised merger agreement brings us even closer to combining two of the greatest storytelling companies in the world and with it even more people enjoying the entertainment they love to watch the most,” said David Zaslav, President and CEO of Warner Bros. Discovery. “By coming together with Netflix, we will combine the stories Warner Bros. has told that have captured the world’s attention for more than a century and ensure audiences continue to enjoy them for generations to come.”
“The WBD Board continues to support and unanimously recommend our transaction, and we are confident that it will deliver the best outcome for stockholders, consumers, creators and the broader entertainment community,” said Ted Sarandos, co-CEO of Netflix. “Our revised all-cash agreement will enable an expedited timeline to a stockholder vote and provide greater financial certainty at $27.75 per share in cash, plus the value from the planned separation of Discovery Global. Together, Netflix and Warner Bros. will deliver broader choice and greater value to audiences worldwide, enhancing access to world-class television and film both at home and in theaters. The acquisition will also significantly expand US production capacity and investment in original programming, driving job creation and long-term industry growth.”
“Over the last decade, when much of the entertainment industry has contracted, Netflix has grown and invested tremendously in the business of film and television in the US and abroad. This transaction will further fuel that growth and investment,” said Greg Peters, co-CEO of Netflix. “By amending our agreement today, we are underscoring what we have believed all along: not only does our transaction provide superior stockholder value, it is also fundamentally pro-consumer, pro-innovation, pro-creator and pro-growth. Our revised all-cash agreement demonstrates our commitment to the transaction with Warner Bros. and provides WBD stockholders with an accelerated process and the financial certainty of cash consideration, while maintaining our commitment to a healthy balance sheet and our solid investment grade ratings. We will continue to work closely with WBD to successfully complete the transaction as we remain focused on our mission to entertain the world and, together, define the next century of storytelling.”
“Our amended agreement with Netflix is a testament to the Board’s unrelenting focus on representing and advancing our stockholders’ interests,” said Samuel A. Di Piazza, Jr., Chair of the Warner Bros. Discovery Board of Directors. “By transitioning to all-cash consideration, we can now deliver the incredible value of our combination with Netflix at even greater levels of certainty, while providing our stockholders the opportunity to participate in management’s strategic plans to realize the value of Discovery Global’s iconic brands and global reach. We look forward to continuing to engage with our investors about the compelling benefits of the transaction as we progress toward our stockholder vote on an accelerated timeline.”