Meta description: Warner Bros. Discovery rejects a $30 per share offer, backing a Netflix merger with mixed cash and stock value, citing stronger deal certainty and lower risk.
Warner Bros. Discovery has declined a $108 billion takeover offer priced at $30 per share, choosing to move forward with its agreed merger with Netflix at $27.75 per share. The board cited inadequate value, financing gaps, and higher deal certainty with Netflix. Investors, analysts, and corporate strategists tracking large-scale media acquisitions will find this decision critical.
What are the deal terms and valuations?
The declined offer was structured as an all-cash bid of $30 per share, valuing Warner Bros. Discovery at about $108 billion. The preferred Netflix transaction is priced at $27.75 per share, paid as $23.25 in cash and $4.50 in Netflix common stock, with a collar range set to manage price fluctuation risk in the stock portion. This will follow a planned Q3 2026 spin-off of Discovery Global, which contains the company’s TV networks. The board estimates the combined value of cash, stock, and the spun-off entity produces superior shareholder returns compared to the competing bid.
Netflix has committed to a binding merger agreement, backed entirely by its balance sheet and debt commitments, removing reliance on third-party equity financing. In contrast, the $30 cash offer carried conditions and allowed amendment of terms before completion, lowering certainty in execution.
Who is backing each offer financially?
The all-cash proposition relied on a $40.65 billion equity commitment tied to a revocable trust owned by a major technology founder. No unconditional personal or family guarantee was provided. The rest of the financing involved debt support from a media company with a market capitalization near $15 billion and a credit rating close to speculative grade. High projected leverage of 6.8x debt to EBITDA by 2026 and low near-term free cash flow raised red flags for Warner Bros. Discovery’s board.
Earlier iterations of the cash offer included sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi, and an investment firm previously founded by a prominent political figure. These participants later withdrew governance rights or exited entirely, leaving the bid dependent on fewer parties. The Netflix offer faces no need for equity financing and benefits from a market cap exceeding $400 billion and investment-grade credit.
What does this mean for the industry?
From a business standpoint, the board warned that aggressive synergy targets of $9 billion tied to the cash bid could reduce competitive capacity in Hollywood. Netflix’s projections are in the lower $2 to $3 billion range, aligning more closely with sustainable operational efficiencies. The board sees the Netflix deal as pro-consumer and pro-growth, compared to the higher risk and less transparent financing structure in the alternative bid.
On regulatory risk, the board judged the outcomes of both possible transactions as having similar potential for approval. Netflix agreed to a $5.8 billion reverse termination fee if approval fails, higher than the $5 billion fee in the other offer, adding commitment strength.
FAQ
1. Why did the board reject the cash offer?
They felt it provided less value, relied on uncertain financing, and carried higher execution risks compared with Netflix.
2. What makes the Netflix proposal more secure?
It is backed by a binding agreement, Netflix’s own resources, and firm financing commitments without equity uncertainty.
3. How does the spin-off factor into value?
Shareholders will receive value from Discovery Global after separation, adding to the merger consideration.
4. Was regulatory approval decisive?
No, the board saw similar risks for both offers but valued Netflix’s termination fee and commitment more highly.
Key takeaways
For founders and investors, this case shows how deal certainty and financing transparency can outweigh headline offer prices. All-cash bids are attractive on the surface but require full visibility and binding commitments to win board approval. Strong balance sheets and credible synergy targets remain decisive in mega mergers.
Disclaimer
This report is for informational purposes only and does not constitute financial advice. Readers should conduct their own due diligence before making investment decisions.
Announcement
This article is based on publicly available financial information.