WBD Issues Statement Saying PSKY Proposal Could 'Reasonably Be Expected To Lead To A Superior Offer'
However, Netflix continues to have the most likely path forward
The Warner Bros. Discovery met earlier today and just issued this statement. Which essentially says the Paramount Skydance deal might meet the threshold to be considered a “superior deal” to the one presented by Netflix. But if that turns out to be the case, Netflix would have four days to match or surpass the new Paramount Skydance offer.
But despite all that, at least for now, the WBD board still recommends the Netflix offer.
Here is the complete text of the statement:
Warner Bros. Discovery, Inc. (”Warner Bros. Discovery” or “WBD”) (NASDAQ: WBD) today announced that its Board of Directors (the “Board”), consistent with its fiduciary duties and following consultation with its independent financial and legal advisors, has determined that the revised proposal from Paramount Skydance Corporation (”Paramount Skydance” or “PSKY”) (NASDAQ: PSKY) could reasonably be expected to lead to a “Company Superior Proposal” as defined in WBD’s merger agreement with Netflix, Inc. (”Netflix”) (NASDAQ: NFLX) (the “Netflix Merger Agreement”).
The revised proposal includes an increased purchase price of $31.00 per WBD share in cash, plus a daily ticking fee equal to $0.25 per quarter beginning after September 30, 2026, as well as a $7 billion regulatory termination fee payable by PSKY in the event the transaction does not close due to regulatory matters, payment by PSKY of the $2.8 billion termination fee that WBD would be required to pay to Netflix to terminate the existing Netflix Merger Agreement, an obligation to contribute additional equity funding to the extent needed to support the solvency certificate required by PSKY’s lending banks, and a “Company Material Adverse Effect” definition that excludes the performance of WBD’s Global Linear Networks business.
The Board has not made a determination as to whether the revised PSKY proposal is superior to the merger with Netflix. WBD will engage further with PSKY to determine if a proposal that constitutes a “Company Superior Proposal,” as defined in the Netflix Merger Agreement, can be reached. In the event that the Board ultimately determines such a “Company Superior Proposal” has been received, Netflix will have four business days after such determination to negotiate with WBD and to propose any revisions to the Netflix transaction.
There can be no assurance that the Board will conclude that the transaction proposed by PSKY is superior to the merger with Netflix or that any definitive agreement or transaction will result from WBD’s discussions with PSKY. The Netflix Merger Agreement remains in effect, and the Board continues to recommend in favor of the Netflix transaction and is not withdrawing or modifying its recommendation.
Good coverage of a genuinely messy deal structure. The part worth unpacking is the "Company Material Adverse Effect" exclusion for WBD's Global Linear Networks business, which is doing quiet but important work here. PSKY is essentially absorbing the risk of linear decline being treated as a deal-breaker by lending banks, which is a real consesion. I follwed the original Skydance-Paramount deal closely and that same clause was a sticking point then too.
Really solid breakdown of a genuinley complex M&A moment. The interesting thing is that WBD flagging the PSKY offer as potentially "superior" is more of a negotiating lever than a real endorsement, basically forcing Netflix to show its hand again, which I've seen play out in past media deals. The $7B regulatory termination fee is also doing a lot of heavylifting in making this look attractive on paper.