Netflix bolsters its bid for Warner Bros. by making it all cash

By Lukas I. Alpert and Tomi Kilgore

The change addresses one of Paramount's main arguments for why its rival buyout bid was better - it didn't include stock.

Netflix addresses concerns by changing its bid for Warner Bros. to all cash.

Netflix Inc. and Warner Bros. Discovery announced on Tuesday a significant change to their merger agreement, with Netflix agreeing to make it all cash.

The removal of the stock component comes after the price of Netflix shares (NFLX) has dropped sharply since the agreement was reached, effectively lowering the value of the buyout bid. It also addresses one of rival Paramount Skydance Corp.'s (PSKY) central arguments that its so-far rejected hostile bid was better for Warner Bros. shareholders - because it was all cash.

Bloomberg had previously reported that Netflix was considering changing its bid for Warner Bros. Discovery Inc. (WBD) to all cash.

Netflix's previous $82.7 billion acquisition agreement was made up of about 84% in cash, with the rest in Netflix stock. But since the agreement was announced on Dec. 5, Netflix's stock has fallen 14.7% through Friday.

As part of its accepted bid, Netflix had agreed to pay $23.25 per WBD share in cash plus $4.50 of Netflix common stock for each share of WBD. But the terms of the deal included certain adjustments in the price, known as a collar, if Netflix shares fell below $97.91 per share. Netflix shares closed at $88.03 on Tuesday.

The companies said the revised agreement simplifies the deal structure and provides greater certainty for Warner Bros. shareholders.

"Our revised all-cash agreement will enable an expedited timeline to a stockholder vote and provide greater financial certainty at $27.75 per share in cash, plus the value from the planned separation of Discovery Global," said Netflix co-Chief Executive Ted Sarandos.

The boards of both companies said they had unanimously accepted the amended offer.

Netflix's stock rose 1.3% in premarket trading, to buck the broad-market selloff, while Warner Bros. shares slipped 0.5%.

Meanwhile, Paramount's stock fell 0.9% ahead of Tuesday's open.

The Warner Bros. board has rejected Paramount's offer numerous times, and has advised shareholders to stick with the Netflix bid.

The board has repeatedly raised questions about the stability of Paramount's financing, which has the backing of Oracle Corp. (ORCL) co-founder Larry Ellison, one of the richest people in the world. It has also said it believes Paramount's bid undervalues Warner Bros.' cable properties.

Last week, Paramount filed a lawsuit demanding Warner Bros. explain how it determined the Netflix bid was superior, while also threatening to submit a rival slate of directors at Warner Bros.' next annual meeting.

Warner Bros. has dismissed the suit as "meritless."

Netflix has said that it had begun engaging with regulatory authorities in the U.S. and Europe about approving the deal. Netflix has said it expects the deal to take 12- to 18-months to close.

Netflix is scheduled to release its fourth-quarter earnings report after Tuesday's closing bell. Investor can expect at least some comments and questions about the Warner Bros. Discovery acquisition deal, when it holds its conference call with analysts.

-Lukas I. Alpert -Tomi Kilgore

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01-20-26 0812ET