We have heard that Netflix (NFLX) came back with a fresh bid to take over entertainment giant Warner Bros. Discovery (WBD). While we do not know how much the bid is, we do know that the bid is “mostly cash.” And there is an extra wrinkle involved in the Netflix bid, based on some reports, that is not being mentioned near so often. But the attention is certainly doing big things for Warner, as investors sent shares up nearly 3% in the closing minutes of Tuesday’s trading.
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All three firms in the hunt—Netflix, Paramount Skydance (PSKY), and Comcast (CMCSA)—reportedly brought new offers back for control of Warner, which will likely not be a lot of help for Warner in making a decision. Now, it has the option to either request a third round of bids, or just pick a buyer it prefers to start into a “definitive agreement.”
There are concerns about regulatory approval, with reports suggesting Paramount Skydance will have the smoothest time, while Comcast will face heightened concern. Netflix will also stand for some regulatory flak as well, though perhaps, not as much as Comcast. Throw in the issue of Warner’s linear channels and sports rights—Warner has been aggressively adding niche sports rights to its roster for weeks now—and that complicates the picture further
The Big Surprise for Netflix
As it turns out, though, Netflix’s new cash bid is likely to come with an even bigger issue: debt. Reports suggest that Netflix’s big new offer is going to come with a serious price tag as Netflix is preparing to go into debt to the tune of multiple billions of dollars.
Current word suggests that all three bids are over the previous $60 billion all-cash proposal that Paramount Skydance brought out, and there would also be the Warner debt itself to consider, as the winner will be taking over that as well.
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on eight Buys and 10 Holds assigned in the past three months, as indicated by the graphic below. After a 126.26% rally in its share price over the past year, the average WBD price target of $22.08 per share implies 9.97% downside risk.
