Warner Bros. opens door to Paramount as bidding war heats up

In a significant development, Warner Bros. Discovery's board said Tuesday that Paramount's revised bid "could reasonably be expected to lead to" a superior proposal to the existing Netflix deal -- a key legal threshold that would allow for more formal negotiations with Paramount.

Warner Bros. said Paramount's revised offer includes a purchase price of $31.00 per share in cash, a one-dollar-per-share increase from its earlier offer, which was valued at around $108 billion.

Paramount has also offered to cover the $2.8 billion termination fee Warner Bros. would owe Netflix if it walked away from their deal, and pledged a $7 billion fee payable to Warner Bros. should the Paramount transaction fail to close due to regulatory hurdles.

Questions are swirling over whether politics will influence the outcome of the battle, with Paramount run by David Ellison and the transaction financed largely by his father, Oracle tycoon Larry Ellison, a longtime Trump ally.

Trump has said he will be "involved" in any decision on the merger, and the US Department of Justice is currently reviewing Netflix's proposed acquisition. European authorities and other regulators will also have their say.

A victory by Paramount would see news outlet CNN -- often the target of Trump's threats and criticism -- pass to Ellison family control, amid criticism that their takeover of Paramount-owned CBS brought changes more to the White House's liking.

The Netflix offer does not include Warner Bros. television properties such as CNN and Discovery, which would belong to a newly created publicly traded company if the deal is sealed.

- Review ongoing -

The Warner Bros. board stressed it had not yet concluded that Paramount's offer was superior to Netflix's, and that it would continue talks with Paramount to determine if that bar could be met. 

If it was, Netflix would have four business days to come back with a counter-offer.

Earlier in the day, Warner Bros. acknowledged the new offer but said its deal with Netflix "remains in effect" and that board members "continue to recommend in favor of the Netflix transaction," stressing it was not withdrawing its recommendation.

Warner Bros. shareholders were advised to take no action with respect to the Paramount offer while the review is ongoing.

Netflix is offering $83 billion for its more limited merger but is expected to be prepared to raise its offer to more closely match its rival's new bid.

Trump late Saturday called on Netflix to fire board member Susan Rice or "pay the consequences," after she said Democrats would push for corporate accountability if they regain power in the November midterm elections.

"He likes to do a lot of things on social media. This is a business deal. It's not a political deal," Netflix co-CEO Ted Sarandos told BBC Radio 4, when asked about Trump's threat.

arp/aha