NEW YORK—Following an report by the Wall Street Journal that Paramount is likely to make a bid for all of Warner Bros. Discovery as soon as next week, Lightshed Partners analyst Richard Greenfield has issued an investment note that argues the Paramount is likely to emerge as the winner if others try to challenge their bid.
Greenfield believes that the immense financial resources of Ellison family, which controls Paramount, the huge price tag for acquiring WBD (valued at over $41 billion with $35 billion in debt), and a regulatory climate that is likely to favor the Ellisons, make them likely to emerge as the winners in any bidding war.
“While we could still foresee Comcast bidding for WBD now…to push Paramount’s price higher, as they did in the Disney/Fox battle, the problem for Comcast now is two-fold: the Trump administration is not favorable to Comcast, whereas the administration is quite fond of the Ellison family, and the Ellison family has massive wealth to raise their bid, which would be impossible for Comcast/Roberts family to match,” Greenfield noted.
“While WBD investors may hope for competitive bids from Netflix, Amazon or Apple, we do not believe any are likely to bid and even Comcast will be hard pressed to actually bid knowing they almost certainly cannot win.”
Greenfield also argued that they “expect a Paramount bid that is likely higher than you would expect for WBD and mostly in cash to force the WBD board to vote yes and to prevent alternative bidders. We could envision a bid of $20.00-22.50, mostly in cash from the Ellison family, ensuring that the combined company is tightly controlled, enabling them to execute their long-term vision (as we discussed here)...It’s worth noting that Paramount Skydance did not originally believe the WBD split was actually going to occur due to leverage issues. However, when WBD’s plans shifted to sell a 20% stake in the Studios/HBO assets ahead of the split to a strategic or private equity, it appears Paramount realized they had to move quickly on WBD before that happened.”
