Netflix has announced a significant revision to its acquisition agreement with Warner Bros. Discovery, shifting from a previous stock-and-cash arrangement to an all-cash deal. The streaming giant revealed this amended offer on Tuesday morning, just hours before it was scheduled to report its quarterly earnings to investors.
Revised Deal Structure and Financial Implications
The new all-cash bid eliminates the $4.50 stock equity component that was part of the original agreement reached last month. This revision leaves the per-share offer at $27.75 and addresses concerns about the valuation of Warner Bros. Discovery's cable assets, which are set to be spun off into a separate entity named Discovery Global.
According to Netflix co-CEO Greg Peters, "By amending our agreement today, we are underscoring what we have believed all along: not only does our transaction provide superior stockholder value, it is also fundamentally pro-consumer, pro-innovation, pro-creator and pro-growth."
Earnings Context and Market Pressure
The revised deal comes at a critical moment for Netflix, whose share price has experienced significant declines since last fall's earnings report revealed slowing subscriber growth. The company's stock has continued to tumble following the initial Warner Bros. Discovery merger announcement last month.
Prior to Tuesday's market opening, analysts expected Netflix to report fourth-quarter earnings of 55 cents per share and revenue of $12 billion, representing substantial increases from the previous year. However, Bloomberg data indicates that analysts project slowing revenue growth for Netflix over the next three quarters before another anticipated jump in 2027.
Competitive Landscape and Paramount's Challenge
The sweetened Netflix offer places additional pressure on Paramount Skydance chief David Ellison, who has been pursuing a hostile takeover of Warner Bros. Discovery with an all-cash offer of $30 per share. Ellison's bid, which would include Warner Bros. Discovery's cable and television assets, has been repeatedly rejected by the company's board of directors.
Ellison recently filed a lawsuit seeking to force Warner Bros. Discovery to disclose additional financial information about its Netflix deal, with much of his argument centered on the perceived value of the soon-to-be spun-off Discovery assets. According to Ellison, the cable assets that Paramount would acquire in its offer are essentially worthless, making his proposal potentially more lucrative to Warner Bros. shareholders.
Legal Developments and Board Approval
A Delaware judge rejected Paramount's motion to expedite a trial last week, stating that the company had failed to demonstrate it would "suffer irreparable harm" due to Warner Bros. Discovery's alleged lack of disclosure. Warner Bros. Discovery responded to the lawsuit in a statement, saying, "Today's lawsuit by Paramount Skydance was yet another unserious attempt to distract and the Judge saw right through it."
The revised Netflix deal has already received approval from the Warner Bros. Discovery board, and the companies anticipate that Warner shareholders will be able to vote on the agreement by April. This amended structure could potentially sway some shareholders who had been leaning toward pushing Warner Bros. Discovery to accept the Paramount deal instead.
Discovery Global Valuation and Financial Projections
In a Securities and Exchange Commission filing released on Tuesday, Warner Bros. Discovery provided an estimate of Discovery Global's potential value, comparing it to Versant – the recently spun-off company from Comcast that primarily comprises NBC Universal's cable channels, including CNBC and MS NOW (previously MSNBC).
According to the filing, Discovery Global – which would include CNN, TBS, TNT Sports and other digital outlets – could have a share value ranging from as low as $1.33 to as high as $6.86. Paramount has argued that Discovery could be valued as low as $0 per share when compared to Versant's performance since it went public earlier this month.
However, CNN has demonstrated better-than-anticipated financial projections, with Warner Bros. forecasting that the cable news pioneer will generate $1.8 billion in revenue this year and $2.2 billion in 2030, according to the latest company filing.
Political Dimensions and Executive Statements
The acquisition battle has taken on political dimensions, with President Donald Trump indicating he will be heavily involved in approving the Warner Bros. Discovery purchase. Ellison, whose hostile takeover bid is largely backed by his ultra-wealthy father and close Trump ally Larry Ellison, has suggested he has a "Trump card" in his pursuit of Warner Bros. Discovery.
Trump has repeatedly praised Ellison as a "great" and "amazing" person while expressing support for his leadership of Paramount. Ellison, who has already made CBS News more "MAGA-friendly" since his Trump-approved purchase of Paramount last year, has reportedly promised the president he would implement "sweeping changes" at CNN – which Trump has long criticized as "fake news" – should he acquire Warner Bros. Discovery.
At the same time, the president has also commended Netflix co-CEO Ted Sarandos as a "fantastic man" and has met with the streaming executive multiple times at the White House. It was revealed this month that Trump recently purchased corporate bonds from both Netflix and Warner Bros. Discovery.
Despite this, Trump recently shared a month-old article from Trump-boosting outlet One America News that called for the cancellation of Netflix's "cultural takeover" of Warner, describing the streaming giant as a "woke media monopoly." When asked about the president's social media post, Sarandos told the New York Times last week that he didn't "know why he would have done that," adding that "no conversation we ever had was about any of the things that were in that article that he posted."
Warner Bros. Discovery chief David Zaslav noted in his own statement, "Today's revised merger agreement brings us even closer to combining two of the greatest storytelling companies in the world and with it even more people enjoying the entertainment they love to watch the most."
The Hollywood Reporter's Alex Weprin observed, "Discovery will likely become the focal point of the battle for Warner Bros. Discovery going forward, as the value of the 'stub' company is now the sticking point when it comes to which offer is truly the better deal: Netflix's bid for Warner Bros. and a share of Discovery, or Paramount's bid for the whole thing."
