Paramount is staying the course on its $30-a-share bid for Warner Bros. Discovery, again appealing directly to shareholders.
The move comes after Warner Bros. Discovery’s board voted unanimously this week to reject Paramount’s revised bid, in which billionaire Larry Ellison agreed to personally guarantee the equity portion of his son’s firm’s financing package.
Paramount Skydance, in a Thursday statement, sidestepped Warner’s latest complaints about the enormous debt load that Paramount would need to pull off a takeover. Paramount instead said the appeal of its bid should be obvious: $30 a share in cash for all of Warner Bros. Discovery, including its large portfolio of cable channels, including CNN, HGTV, TBS and Animal Planet.
Warner board members have countered that Netflix’s $27.75 cash and stock bid for much of the company is superior because Netflix is a stronger company. Warner also has complained that it would have to incur billions in costs, including a $2.8-billion break-up fee, if it were to abandon the deal it signed with Netflix on Dec. 4.
The streaming giant has agreed to buy HBO, HBO Max and the Warner Bros. film and television studios, leaving Warner to spin off its basic cable channels into a separate company later this year.
The murky value of Warner’s cable channel portfolio has become a bone of contention in the company’s sale.
“Our offer clearly provides WBD investors greater value and a more certain, expedited path to completion,” Paramount Chief Executive David Ellison said in Thursday’s statement. Paramount said it had resolved all the concerns that Warner had raised last month, “most notably by providing an irrevocable personal guarantee by Larry Ellison for the equity portion of the financing.”
Paramount is gambling that Warner investors will evaluate the two offers and sell their shares to Paramount. Stockholders have until Jan. 21 to tender their Warner shares, although Paramount could extend that deadline.
The Netflix transaction offers Warner shareholders $23.25 in cash, $4.50 in Netflix stock and shares in the new cable channel company, Discovery Global, which Warner hopes to create this summer.
Comcast spun off most of its NBCUniversal cable channels this month, including CNBC and MS NOW, creating a new company called Versant. The result hasn’t been pretty. Versant shares have plunged about 25% from Monday’s $45.17 opening price. On Thursday, Versant shares were selling for about $32.50. (Versant has said it expected volatility early on as large index funds sold shares to rebalance their portfolios).
Paramount pointed to Versant’s woes and also argued that fluctuations in Netflix’s stock further reduces the value of the Netflix offer.
“Throughout this process, we have worked hard for WBD shareholders and remain committed to engaging with them on the merits of our superior bid and advancing our ongoing regulatory review process,” Ellison said.
Paramount is relying on equity backing from three Middle Eastern sovereign wealth funds, including Saudi Arabia. It turned to Apollo Global for much of its debt financing. Warner said this week that Paramount’s proposed $94-billion debt and equity financing package would make its proposed takeover of Warner the largest leveraged buyout ever.
Amid the stalemate, Paramount and Warner stock held steady. Paramount was trading around $12.36, while Warner shares are hovering around $28.50 on Thursday.
