Netflix weighs all-cash bid to clinch Warner Bros takeover battle
What's the story
Netflix is considering a revised bid strategy to acquire Warner Bros. Discovery Inc.'s studios and streaming businesses, according to Bloomberg. The streaming giant has been mulling over an all-cash offer for these assets. The move is part of efforts to expedite a sale that has faced political opposition as well as competition and legal challenge from rival bidder Paramount Skydance Corp.
Deal details
Original deal terms and Netflix's financial backing
The initial agreement proposed Warner Bros. shareholders receive $23.25 in cash and $4.5 in Netflix common stock, with adjustments if the streaming company's shares fall below $97.91. Since Netflix's bid for Warner Bros. began in October, its shares have lost nearly a quarter of their value, hitting a low of $89.07 on Tuesday. To fund the acquisition, Netflix secured $59 billion from Wall Street banks and has already refinanced about $25 billion with some long-term debt instruments.
Financial stability
Netflix's credit ratings remain strong
Despite the challenges, Netflix has the capacity to borrow more without compromising its "robust" credit ratings, Bloomberg Intelligence senior credit analyst Stephen Flynn said in a research note. He noted that "Netflix has a very strong balance sheet with modest net leverage." This indicates that even with potential changes to its acquisition strategy, Netflix remains financially stable and capable of handling additional debt if necessary.
Rival interference
Paramount's attempts to derail Netflix-Warner Bros. deal
Since Warner Bros. chose Netflix in early December, Paramount has made several attempts to derail the deal and accept its own offer instead. Paramount CEO David Ellison and Oracle Corp co-founder Larry Ellison have made a tender offer for Warner shares, pledged $40.4 billion in funding, and sued Warner Bros. for more information about their valuation of the Netflix transaction. They also plan to nominate directors on the board to block this deal from going through successfully.