The board has not yet decided how to proceed and remains bound by its existing agreement with Netflix, the people said, asking not to be identified as the discussions are private.
Last week, Paramount submitted revised terms, aiming to address earlier concerns. As part of the proposal, the company has offered to cover a $2.8 billion break fee that Warner Bros. would owe Netflix if it exits the agreement. Paramount has also proposed to backstop a refinancing of Warner Bros.’ debt and said it would compensate Warner Bros. shareholders if the transaction does not close by December 31, signalling confidence in swift regulatory clearance.While Warner Bros. still has reservations about Paramount’s bid, many of which it has previously outlined, this is the first time the board has discussed whether Paramount’s approach could result in a better deal or prompt Netflix to raise its offer. The board has also faced shareholder pressure to engage with Paramount.
Warner Bros. has agreed to sell its namesake studio and the HBO Max streaming business to Netflix at $27.75 per share. The company has been moving quickly to secure shareholder approval for that deal, even as Paramount has taken its case directly to investors through a $30-a-share tender offer and by lobbying regulators.
Both Paramount and Netflix have indicated they may be willing to increase their bids. While Paramount chief executive David Ellison has said the current offer is not his final bid, Netflix’s leadership has told shareholders it could also go higher, Bloomberg reported.Nevertheless, both suitors remain cautious about overpaying. Netflix shares have fallen more than 40% from their June peak, reflecting investor concerns around the Warner Bros. transaction.
Chris Marangi, co-chief investment officer at Gabelli Funds, said Paramount’s revised proposal suggests it is finding “ways to be creative about structuring a deal”.
Marangi, whose firm holds Warner Bros. shares, said, “Like the Warner Bros. board, I want to see a sweetened offer.”
If Warner Bros. chooses to formally re-engage with Paramount, it would first need to notify Netflix. The company would then seek to push Paramount’s offer beyond $30 a share. Should Paramount’s proposal be deemed superior, Netflix would retain the right to match it.
Paramount initially triggered the auction for Warner Bros. with an unsolicited bid last year, raising its price several times before ultimately losing out to Netflix. Since then, Paramount has continued courting regulators and shareholders, arguing its deal offers better long-term value.
Some Warner Bros. investors, including Pentwater Capital Management and Ancora Holdings Group, have publicly urged the board to engage with Paramount. However, Bloomberg noted that only 42.3 million shares — less than 2% of those outstanding — had been tendered to Paramount so far.
