The board of Warner Bros Discovery (WBD) has urged its shareholders to reject an amended hostile bid by Paramount Skydance while maintaining its unanimous support for a rival offer by Netflix.
A letter to investors said the updated $108.4bn all-cash offer from Paramount, for the whole business, involved an “extraordinary amount of debt financing” that represented a risk to any deal completing.
Paramount’s bid was hostile, through a direct approach to WBD’s shareholders, as the board had already thrown its weight behind the $72bn ($54bn) cash and stock offer made by Netflix in early December.
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It reiterated that continued support for the Netflix bid in the letter and dismissed claims by Paramount that its offer was “superior”.
The Netflix bid comprises WBDs TV and film studios, their respective back catalogues including Harry Potter and Game of Thrones, alongside the HBO Max streaming service.
Paramount made its case to WBD investors as it remained unclear whether the streaming market dominance enjoyed by Netflix would prove a stumbling block to its takeover deal, given likely interest from competition regulators.
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David Ellison, chairman and CEO of Paramount, said when the hostile bid was launched: “Our public offer, which is on the same terms we provided to the Warner Bros Discovery Board of Directors in private, provides superior value, and a more certain and quicker path to completion.
“We believe the WBD Board of Directors is pursuing an inferior proposal which exposes shareholders to a mix of cash and stock, an uncertain future trading value of the Global Networks linear cable business and a challenging regulatory approval process.”
He urged them to “maximise” the value of their investment.
WBD shares are currently trading around the $28 per share mark.
The cash and stock deal offered by Netflix is valued at $27.75 per Warner share. Paramount’s offer stacks up at $30 per share.
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While Netflix’s offer has a lower headline value, financial analysts have said it presents a clearer financing structure and fewer execution risks than Paramount’s bid for the entire company, including its cable TV business.
The Warner Bros board told shareholders that the Paramount financing plan would saddle the smaller Hollywood studio with $87bn in debt.
It said that the revised offer, which included a commitment to use $40bn in equity personally guaranteed by Mr Ellison’s father – the Oracle billionaire co-founder Larry Ellison – remained inadequate.
It cited “the insufficient value it would provide, the lack of certainty in PSKY’s ability to complete the offer, and the risks and costs borne by WBD shareholders should PSKY fail to complete the offer”.
