(Jan 14): Netflix Inc is working on revised terms for its Warner Bros Discovery Inc acquisition and has discussed making an all-cash offer for the company’s studios and streaming businesses, people familiar with the discussions said.
The changes are designed to expedite a sale that will take months to close and has faced opposition both from politicians and rival bidder Paramount Skydance Corp. Institutional investors have been divided in their support.
Under the original agreement, Warner Bros shareholders were to receive US$23.25 in cash and US$4.50 in Netflix common stock, with certain adjustments in place if shares of the streaming giant fall below US$97.91. Since the company’s pursuit of Warner Bros began in October, Netflix shares have lost about a quarter of their value. They traded as low as US$89.07 on Tuesday in New York.
Netflix lined up US$59 billion ($76 billion) of financing from Wall Street banks to help support its acquisition, in the form of one of the largest ever bridge loans. They have already refinanced about US$25 billion of that with some longer-term debt.
Netflix has the financial capacity to borrow more and still maintain its “robust” credit ratings, Stephen Flynn, a senior credit analyst at Bloomberg Intelligence, said in a research note on Tuesday.
“Netflix has a very strong balance sheet with modest net leverage,” he said.
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After choosing Netflix in early December, Warner Bros has faced repeated efforts by Paramount to scuttle that deal and accept its offer.
Paramount chief executive officer David Ellison and his father, Oracle Corp co-founder Larry Ellison, have launched a tender offer for Warner shares, extended a personal guarantee to US$40.4 billion of funding and sued Warner Bros for more details about their valuation of the Netflix transaction.
They also plan to nominate directors to the board to thwart the deal.
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Warner Bros rose 1.6% to US$28.86 at the close in New York following the news of Netflix’s deliberations. Shares of Netflix rose 1% to US$90.32.
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