NEW YORK—Warner Bros. Discovery’s board has voted unanimously to recommend that shareholders reject Paramount Skydance’s newest tender offer as “insufficient” and “risky."
The board concluded that the revised Dec. 22 Paramount offer “remains inferior” to the deal it accepted from Netflix for a variety of reasons, including the “extraordinary amount of debt financing” that would create significant risks.
In December, Netflix struck a deal with WBD to acquire certain assets, including HBO and the Warner Bros. film and TV studios, for $82.7 billion.
“The Board unanimously determined that Paramount's latest offer remains inferior to our merger agreement with Netflix across multiple key areas,” Warner Bros. Discovery chair Samuel A. Di Piazza Jr. said. “Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for our shareholders if a transaction is not completed. Our binding agreement with Netflix will offer superior value at greater levels of certainty, without the significant risks and costs Paramount’s offer would impose on our shareholders.”
Paramount Skydance countered with a hostile takeover bid offer to acquire all of the outstanding shares of Warner Bros. Discovery for $30 per share in cash, or about $108.4 billion.
After this was rejected by the WBD board, Paramount issued a revised offer on Dec. 22.
In a note to investors, analysts Richard Greenfield, Brandon Ross and Mark Kelley at LightShed Partners concluded: ”For Paramount to win, it not only needs to raise its bid substantially above $30/share (one or two dollars incremental is likely irrelevant), it also needs to change the composition of its bid to absorb the billions of costs associated with abandoning the Netflix bid and shift the financing from mostly debt to mostly cash (they can take out debt post-close, not before). Not to mention, the far larger amount of cash needed would have to come from sources that do not create potential regulatory risks (Middle East/CFIUS). There is still a path for Paramount to outbid Netflix with a substantially higher bid, but it will require an overhaul of their current bid, and a dramatic increase in the cash invested from the Ellison family and/or their friends and financing partners.”
