00:00So basically Warner Brothers was able to negotiate a waiver from Netflix. They still have this signed agreement with Netflix
00:05but Netflix has said if you want you can talk to Paramount for the next seven days see what you
00:10can get out of them and so that's what's going to happen over the next seven days. It's kind of
00:13this make or break moment. Paramount has been teasing for months that it has more to offer you know that
00:17it's $30 a share offer was not its best and final. Now is the time for them to really show
00:21that they have more to offer. Forgive my ignorance. How usual is it for Netflix a company like this to
00:26grant that waiver and say go off and talk with them. So it's something that was negotiated.
00:29As part of the existing agreement in order for Warner Brothers to actually engage with Paramount they had to get
00:35special permission from Netflix to do that. Netflix as the incumbent does still have a leg up because even if
00:41Paramount does put forth a higher offer or an offer that the board the Warner Brothers board deems to be
00:46superior. Netflix would have four days to match that and by matching that means they only have to offer exactly
00:52what Paramount has offered. They don't have to beat Paramount by just matching by tying they win. Is it fair
00:57to also say that Netflix just has more financial
00:59firepower here because there were questions how much can the Ellison's really even raise their bid for Warner Brothers at
01:05this point. And that is still one of the questions we don't know where any additional money will be coming
01:10from. Of course Netflix has a stellar you know balance sheet high investment grade ratings. I think one of the
01:16interesting things that arose over the weekend or that we just learned is that even after Paramount had put forth
01:22its amended offer last week where it made some concessions to Warner Brothers about you know agreeing to pay a
01:27breakup fee and some other things that the board had asked for.
01:29One of its bankers privately contacted Warner Brothers board a member of the board and said if you engage with
01:35us will offer at least $31 a share. So I think now the question that we're all wondering is how
01:39much higher than 31 will they go. And over this next week the Warner Brothers board will be trying to
01:45get everything in writing because of you know it's one thing to say we'll offer more than 31 but if
01:48there are still issues with the documents it's not a guarantee that this will result in a in a deal
01:54with Paramount necessarily.
01:55I know one of the original gripes for this was Warner Brothers calling it like the biggest leverage buyout in
02:00history that there was so much debt. You get Larry Ellison coming in with the personal backing. But don't those
02:05concerns crop up again. If Paramount's offering more money presumably they are adding leverage onto this deal to get them
02:11to a place to allow for it.
02:13So of course I mean adding more money is not going to help with the debt problem. But at some
02:18point you know it'll be up to the board to decide how much do we care about the future of
02:22the company versus getting maximizing value for share.
02:25shareholders. Of course they have a fiduciary duty to maximize value for shareholders. And if that means getting you know
02:30a much higher price but it's going to lead to a levered company down the road. That's something we'll have
02:35to weigh.
02:36Where do these companies stand in making the pitch that like we can better cross or we can better jump
02:42over antitrust hurdles.
02:43So both companies both Netflix and Paramount have argued that they have a better shot of clearing antitrust hurdles. Warner
02:51Brothers has said it sees an equal shot for both of them.
02:55Paramount has been using an approach of of touting all of its approvals that it's getting in various jurisdictions as
03:00proof that it can get this done really quickly.
03:03Netflix has been a little quieter on that front but in their press release today they did actually point out
03:08that one of the approvals that Paramount had gotten in Germany Netflix had also gotten but they just hadn't told
03:13anyone.
03:14And so they're saying hey yeah we also are getting approvals the same way as you are Paramount.
03:17I realize that this is a difficult question and maybe unanswerable. I'm going to ask you about it anyway. If
03:23we go through the seven days and you get Netflix they continue to match whatever Warner Brothers whatever Paramount puts
03:28out there is the seven days is that the end of this or is this a deal that's can drag
03:33on beyond these seven days.
03:34I mean it's the million dollar question. Presumably if you know Warner Brothers determined that it needed more time it
03:41might be able to negotiate an extension on that waiver with Netflix but the message they're sending right now to
03:47Paramount and it's that they sent to them in a letter is now is your time to shine like you've
03:52said that you have more to offer give us your best and final otherwise we're going to move ahead.
03:57And Warner Brothers has scheduled its shareholder vote with Netflix for March 20th so they are in parallel you know
04:03at the same time that they're discussing this with Paramount they are moving ahead business as usual with their plan
04:08to close the Netflix deal.
04:10By the way just before we let you go I know just some of the pricing on it it was
04:14your reporting that suggested what they could go to 31 or that's the initial offer and the best and final
04:18could be beyond that.
04:19So what a Paramount banker had suggested to one of Warner Brothers board members was that they would pay at
04:25least $31 a share if Warner Brothers were to engage. We don't know how much higher they'll go than that.
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