Paramount escalates Warner Bros. Discovery fight with new $31-per-share bid

By Brian Stelter, Jordan Valinsky, CNN

New York (CNN) — Paramount has officially raised its offer for Warner Bros. Discovery, CNN’s parent company, to $31 per share, and now the WBD board says it is extending the window for talks with Paramount about a possible deal.

In addition to the higher price per share, Paramount has also sweetened its proposal in several other ways, including by promising “a $7 billion regulatory termination fee” to WBD “in the event the transaction does not close due to regulatory matters.”

So the talks with Paramount will continue, as WBD strives to land the best deal possible. But the WBD merger agreement with Netflix “remains in place,” the company emphasized, and analysts say Netflix is likely to match the competing bid.

Until now, Paramount has been offering $30 per share, which WBD rejected as “inferior” to the company’s deal to sell its studio and streaming assets to Netflix. Paramount has been appealing directly to WBD shareholders in what is commonly known as a hostile takeover bid.

Last week, Netflix granted WBD a seven-day waiver to hold talks with Paramount while calling Paramount’s push an “ongoing distraction” for the entertainment industry.

The goal, from WBD’s perspective, was to find out Paramount’s “best and final” offer so that shareholders had some clarity about the situation.

On Tuesday morning the WBD board said it was “reviewing” the proposal” but did not release the price details.

That changed on Tuesday afternoon when the WBD board said it had determined that Paramount’s proposal “could reasonably be expected to lead to a ‘Company Superior Proposal’ as defined in WBD’s merger agreement with Netflix.”

In some ways the announcement was just a legally-worded preview of coming attractions, since the WBD board said it “has not made a determination” about whether the new $31 per share proposal is actually “superior to the merger with Netflix.”

But if and when the board makes that determination, Netflix will have four days to counter. Netflix doesn’t have to wait for that announcement, however, to match Paramount’s bid.

Last month, amid the pressure from Paramount, Netflix revised its offer to all cash.

Netflix has already invested significant capital into its pursuit of Warner Bros and HBO, and thus is unlikely to walk away suddenly, though Netflix co-CEO Ted Sarandos said last weekend that his company has a “reputation for willing to walk away and let someone else overpay for things.”

Netflix has also blasted Paramount’s hostile takeover bid for WBD, asserting that Paramount’s “financing challenges and rapid deleveraging plans pose tremendous risk to the entertainment industry.”

The Netflix merger is predicated on Warner Bros. Discovery’s plans to break itself into two publicly traded pieces this summer.

After the split takes effect, Warner Bros will be the name of the company to be acquired by Netflix, while WBD’s cable channels, including CNN, will be part of a separate company called Discovery Global.

WBD CEO David Zaslav said in an internal memo Tuesday morning, “Our work continues on separation efforts and integration planning with Netflix, and our priorities as a business remain unchanged.”

WBD will hold a special shareholder meeting on March 20 and will recommend voting to approve the Netflix deal, which values the studio and streaming assets at $27.75 per share.

Over the weekend, the merger caught the ire of President Donald Trump, who told Netflix to remove board member Susan Rice or “pay the consequences.”

Netflix co-CEO Ted Sarandos told the BBC that Trump “likes to do a lot of things on social media” when asked about his comments. He reiterated that it’s a “business deal” and “not a political deal.”

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