Warner Bros. Discovery urged its shareholders to reject Paramount Skydance’s amended $108 billion bid to take over the media giant, which included a large financial guarantee from billionaire Larry Ellison, insisting Netflix’s deal to acquire the company’s studio and streaming division remained the superior offer.
Key Facts
- In an announcement, the company’s board said it had determined the new offer “remains inadequate,” citing insufficient value and “lack of certainty in Paramount Skydance’s ability to complete the offer.”
- The note adds that Paramount’s offer is neither superior nor “even comparable” to Netflix’s proposed acquisition of Warner’s studio and streaming arms.
- The David Ellison-led Paramount Skydance shared its revised offer with Warner late last month that kept the price at $108 billion but included a $40 billion guarantee from Ellison’s billionaire father Larry Ellison—who is also the world’s fourth richest person.
- Under the amended offer, Paramount also increased the termination fee from $5 billion to $5.8 billion—raising the amount it would have to pay Warner if the deal fell through.
What To Watch For
Warner’s statement noted that: “WBD continues to be of the view that PSKY is a litigious counterparty, which raises concerns regarding the likelihood that the Offer (or any related merger agreement) will be completed on the terms proposed.” Late last month, the New York Post reported that Paramount was formulating a so-called “Defcon-1” strategy to sue Warner if it chose not to accept the deal.
Chief Critics
In a letter to shareholders, Warner Bros. criticized the Paramount deal for relying on an “extraordinary amount of debt financing,” insisting that the purchase would mark the largest leveraged buyout in history. Paramount has a market capitalization of about $14 billion, according to the Warner Bros. board, and would need to finance the deal with about $40 billion in equity and $54 billion in debt. Warner Bros. also claimed Paramount did not guarantee it would pay the $2.8 billion termination fee it would incur should its deal with Netflix fall through, as well as an additional $1.5 billion fee for “failing to complete our debt exchange” and $350 million in interest. The letter also criticized the “operating restrictions” the Paramount deal would place on Warner Bros.—specifically, preventing the company from going through with its plans to spin off its cable television assets into a separate company. Should the deal fall through, Warner Bros. said its shareholders would be left with a company that was “restricted from pursuing its key initiatives for up to 18 months.”
Key Background
Warner Bros. announced it finalized a deal with Netflix in December, selling its studios to the streaming company for about $83 billion but spinning off its cable television businesses like CNN. Paramount quickly countered with its own bid, offering to buy the entire company for about $108 billion. Warner Bros. rejected Paramount’s offer, but the company is now attempting a hostile takeover bid by forcing a shareholder vote. Paramount offered an updated bid later the same month, backed by an “irrevocable personal guarantee of $40.4 billion” from Oracle co-founder Larry Ellison.
Tangent
Cinema United, a trade association for movie theaters, also released a letter to the House Judiciary Committee’s antitrust subcommittee on Wednesday criticizing both deals on the table to purchase Warner Bros. The trade group said it was “deeply concerned” with both bids, noting that the Netflix offer could consolidate more content to a “single, dominant, global streaming platform.” The Netflix proposal also poses what the group calls a potentially “existential” threat to the theater business, noting that until recently the streaming service called theatrical releases “outmoded” and has faced criticism for releasing films for only brief windows in theaters. Meanwhile, the Paramount offer could consolidate up to 40% of the domestic box office under a single studio, the group estimated.
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This story was originally published on forbes.com and all figures are in USD.
