DealLawyers.com Blog

Leave it to the entertainment industry to have a major merger announcement come with major drama, a really fun investor deck, chance restaurant photo ops and celebrities weighing in. The NYT reports that hostile takeover bids are pretty uncommon at top media companies, but, apparently, when they do happen, they’re extra exciting. Of course, I’m talking about Friday’s announcement of the Netflix & Warner Bros. cash and stock deal after a multi-week bidding war and Paramount’s hostile bid that came with only a weekend in between. This was the intersection of business news and Hollywood tabloids that I needed to make yesterday’s dreary Monday-in-December morning more interesting.

Here are some tidbits from Paramount’s Offer to Purchase:

Paramount’s hostile bid includes the same terms as those included in the December 4th proposal to the Warner Bros. board. In communications before the Netflix announcement, Paramount had stressed to Warner Bros. that it did not include “best and final.”

Paramount disputes news reports that “Netflix was the only bidder whose paperwork was fully executable” at the time the Warner Bros. board decided to enter into the deal with Netflix. A December 1 proposal stated, “Our Board of Directors has approved this Offer and we would be prepared to immediately enter into definitive agreements. We have included as annexes to this letter the Merger Agreement and Disclosure Schedule which we are prepared to execute.”

Paramount argues its $30 per share all cash offer is superior because it reflects an 8.1% premium (using the $27.75 per share headline consideration announced by Netflix on December 5) and certainty of value and Paramount does not anticipate significant regulatory risks or delays, whereas Netflix anticipates needing 12-18 months to close for antitrust and regulatory approvals. For a tabular comparison of the Netflix merger agreement and Paramount’s terms, see pages 48 to 49.

News reports suggested that Warner Bros. execs were concerned about certainty of Paramount’s financing. Paramount’s OTP touts that the offer is not subject to any financing conditions; it is fully backstopped by Larry Ellison.

The offer is not subject to CFIUS clearance or FCC approval, but it is subject to two MAE conditions – general and regulatory.

Paramount’s attorneys had sent a letter on December 1 raising some antitrust and regulatory concerns with other bidders, including Netflix. Now, post announcement, President Trump has said (of the Netflix deal), “I’ll be involved,” and that the acquisition “could be a problem.”

Bloomberg’s Matt Levine presented a balanced assessment of the competing offers in yesterday’s Money Stuff. While Paramount has already said it’s willing to throw more money at it, he suggests that Netflix’s shareholders, given its stock price, still don’t seem to love the deal but also expect Netflix to stay in the game. I’m not into news betting, so I definitely won’t be making any predictions, but I’ll be popping popcorn and watching intently to see how this all unfolds.

– Meredith Ervine