Warner Bros reopens door to Paramount, putting Netflix deal in doubt

Core Viewpoint - The bidding war for Warner Bros Discovery has intensified, with Paramount Skydance raising its offer to $31 per share, potentially displacing Netflix as the preferred bidder [1]. Group 1: Paramount's Revised Offer - Paramount has increased its termination fee to $7 billion from $5.8 billion, should the deal fail to gain regulatory approval [2]. - Paramount will pay Warner shareholders 25 cents per share per quarter for every quarter beyond September 30 that the deal does not close [2]. - Paramount has agreed to contribute more equity if banks express concerns about financing the deal [3]. Group 2: Warner Bros Discovery's Board Response - Warner's board has not yet determined if Paramount's revised proposal is superior to Netflix's merger offer, but they will engage further with both bidders [3]. - If a superior deal emerges, Netflix has four business days to revise its offer [3]. Group 3: Comparison of Bids - Paramount's bid is for the entire company at $31 per share, while Netflix's offer is $27.75 per share, totaling $82.7 billion including net debt, specifically for the movie and television studios, catalog, and HBO Max streaming service [5]. - Warner Bros plans to spin off its television division into a separately traded company, Discovery Global [5]. Group 4: Valuation Considerations - The value of Netflix's bid is influenced by the debt level of Discovery Global and its equity value once it starts trading [6]. - Warner's board estimates that Discovery Global could be valued between $1.33 and $6.86 per share, which could enhance total returns to shareholders beyond Paramount's earlier offer of $30 per share [6]. Group 5: Legal and Subjective Considerations - There are expectations of shareholder lawsuits if Netflix wins, as the deals are not directly comparable due to differing asset sets and other details [7].