Netflix is preparing to convert its $82.7 billion deal for TNT Sports parent Warner Bros. Discovery to an all-cash structure, according to industry sources and multiple reports, a move that would respond both to its own declining share price and a continued hostile push for WBD from Paramount.
The original Netflix-WBD agreement, reached in early December, called for each WBD shareholder to receive $23.25 in cash and $4.50 worth of shares in Netflix stock—creating the enterprise value of $82.7 billion. Since then, however, Netflix shares have fallen nearly 12%, including a drop of nearly 2% in early Wednesday trading.
The shift, if it happens, would help expedite a regulatory review, approval, and closing process that is slated to require much of this year. It would also relieve WBD shareholders of bearing the risk of Netflix’s current stock issues.
Despite continued dominance in the streaming space, and the pending arrival of WBD’s studio and streaming businesses, Netflix shares have plummeted by nearly 30% in the last six months. Investors have grown concerned about several issues surrounding Netflix, including rising competition in the streaming business and company debt.
Netflix and WBD declined to comment on the developing situation.
Rival Offer
As Netflix is working on the shift to the WBD deal structure, CBS Sports parent company Paramount continues with its hostile effort to buy all of WBD.
Paramount’s eight offers for WBD, spanning a time before and after WBD put itself up for sale, have all been turned down by the WBD board, most recently last week.
Instead of boosting its all-cash bid of $30 per share, Paramount’s latest moves have been to initiate a lobbying campaign on Capitol Hill, calling the Netflix bid “presumptively unlawful,” and then sue WBD. A suit from Paramount filed Monday in the Delaware Court of Chancery alleges a breach of fiduciary duty and claims that WBD failed to disclose “basic, material valuation information” integral to shareholders as they decide which bid to accept.
Paramount is also planning a proxy fight and says it will put up its own slate of directors for election to the WBD board. WBD has already called the lawsuit “meritless,” and it says it will continue with the planned Netflix agreement.
The battle for the future of WBD has been one of the most-watched sagas across both Hollywood and the media business, and it has large-scale implications for the future of TNT Sports.
