Netflix amends Warner Bros. deal to all cash in bidding war

Netflix has amended its proposed $72-billion purchase of Warner Bros. and HBO, converting it to an all-cash offer in hopes of defusing criticisms from rival bidder, David Ellison’s Paramount.

Netflix and Warner Bros. Discovery approved the change Monday, according to a regulatory filing. Warner board members previously had accepted Netflix’s $27.75-a-share cash-and-stock proposal for Warner’s Burbank studios and HBO streaming operations.

Paramount has complained that its $30-per-share offer for the entire company was higher, and thus, should be the winning bid. Paramount is appealing directly to Warner stockholders, asking them to sell their shares to Paramount by Wednesday.

Netflix stopped short of raising its bid above $27.75 a share, but the Los Gatos streaming giant agreed to pay the full amount in cash should it ultimately win Warner’s legendary studios behind such blockbusters as “Batman,” “The Matrix” and “The Big Bang Theory.” Netflix is not interested in Warner Bros. basic cable channels, which are scheduled to be spun off into a separate company.

Netflix said the change “simplifies the transaction structure, provides greater certainty of value for WBD stockholders, and accelerates the path to a WBD stockholder vote.”

The move was prompted, in part, because Netflix’s stock price has taken a major hit, eroding value in its proposal for Warner Bros.

The new terms neutralize one of Paramount’s primary criticisms: that the stock portion of the Netflix offer makes its bid inferior. Netflix’s shares have lost 29% since its pursuit of Warner Bros. came to light. Paramount shares have also declined about 29% over that time.

Warner Bros. Discovery board members have stuck with Netflix’s proposal — valued at $82.7-billion, including some debt — despite persistent overtures by Ellison’s Paramount.

Warner Bros.’ 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,” Ted Sarandos, co-CEO of Netflix, said in a statement Tuesday.

Warner Bros. Discovery said it would schedule a shareholder meeting. The vote could be held in April.

If the Netflix deal is approved, Warner shareholders would also receive stock in the new company, Discovery Global, which will be made up of Warner’s cable channels, including CNN, TBS, HGTV and Food Network. The spinoff is expected to be completed this summer, but the value of the channels is in doubt, giving Paramount ammunition to claim that its $30-a-share tender offer for the entire company was more lucrative.

Paramount, which has been pursuing the prized assets since September, has sued Warner in Delaware courts to obtain information about how Warner board members came up with a value for the cable channels.

Last week, a Delaware judge refused Paramount’s request for expedited proceedings.

On Tuesday, Warner Bros. separately addressed that Paramount criticism by outlining how it values its cable networks.

Warner Bros.’ advisors value the cable networks from as little as 72 cents a share to as much as $6.86 a share, according to the filing. Paramount has claimed those properties have no value even though cable networks account for most of Paramount’s own sales and profit.

The new company, Discovery Global, would have $17 billion of debt as of June 30, 2026. That would decrease to $16.1 billion by the end of the year. Warner and Netflix also tweaked the agreement so that Discovery Global will have $260 million less debt than initially planned as a result of stronger-than-expected cash flow last year.

The filing projects Discovery Global’s 2026 revenue would reach $16.9 billion and adjusted earnings of $5.4 billion before interest, taxes, depreciation and amortization.

In Tuesday’s announcement, Netflix touted its “strong cash flow generation,” which it said supported the revised all-cash transaction “while preserving a healthy balance sheet and flexibility to capitalize on future strategic priorities.”

Warner Bros. Discovery board members have cited Paramount’s highly leveraged proposal as a weak point, giving it another reason to award the company to the stronger firm, Netflix.

Paramount would need to come up with more than $94 billion in equity and debt to finance the deal.

The battle for Warner Bros. is one of the biggest media deals in the last decade and is expected to reshape the entertainment industry. Netflix emerged as a surprise suitor, entering the fray after Warner Bros. put itself up for sale in October.

Netflix has turned to Wall Street banks to help finance its deal. The company now has $42.2 billion of bridge loans in place, according to a filing Tuesday, a type of facility that is usually replaced with permanent debt like corporate bonds.

Netflix is scheduled to report fourth-quarter financial results on Tuesday after markets close.

Bloomberg News contributed to this report.