Warner Bros Discovery Board Rejects Paramount Skydance’s Hostile Takeover Bid

In a notable move in the entertainment industry, the board of Warner Bros Discovery has firmly dismissed a hostile takeover bid from Paramount Skydance, valued at $108.4 billion. This rejection surfaces just a day after Affinity Partners, a fund connected to Jared Kushner, announced its exit from the deal, adding layers of complexity to the acquisition attempt.

Board’s Concerns Over Financing

The Warner Bros board has accused Paramount of misleading its shareholders regarding the promise of financing associated with its cash offer of $30 per share. According to Warner Bros, Paramount’s assertions that the offer was fully guaranteed by the Ellison family, which includes billionaire Oracle co-founder Larry Ellison, were grossly overstated. David Ellison, Larry’s son, heads Paramount Skydance.

In a detailed letter to shareholders, the Warner Bros board stated that Paramount’s financing was “not reliable,” emphasizing that the offer presented “numerous, significant risks.” This skepticism was underscored by the board’s evaluation that Paramount’s bid was “inferior” to Netflix’s binding offer of $27.75 per share, which comes with strong debt commitments and requires no additional equity financing.

The board pointed out that the Paramount offer could be altered or revoked at any point before the deal’s completion, contrasting sharply with Netflix’s firm merger agreement. While no specific date for a shareholder vote on the deal has been confirmed, it is anticipated to occur in the spring or early summer, as indicated by Warner Bros chairman Samuel Di Piazza in a recent interview.

Netflix’s Position in the Competition

Amid this takeover battle, Paramount has been competing with Netflix for control over Warner Bros, which boasts coveted assets like the HBO Max streaming service and iconic franchises such as Harry Potter. After Warner Bros initially accepted Netflix’s offer, Paramount responded with its own bid.

In a public statement, Netflix co-CEO Ted Sarandos echoed the Warner Bros board’s sentiments about the superiority of their merger agreement, asserting that it serves the best interests of shareholders. Meanwhile, Netflix is actively engaging with U.S. and European regulatory bodies, expressing confidence in their review process.

Paramount’s Financing Strategy

In an effort to secure the backing of Warner Bros shareholders, Paramount has asserted that it has arranged comprehensive financing, including $41 billion in equity from the Ellison family and RedBird Capital, alongside $54 billion in debt from multiple financial institutions. However, the withdrawal of Affinity Partners, a crucial supporter of Paramount’s bid, has raised eyebrows. The fund’s exit highlights shifting dynamics in the investment landscape since their initial involvement.

The Warner Bros board responded to Paramount’s claims by stating that the latest offer lacked a solid commitment from the Ellison family, relying instead on an opaque trust whose assets are not publicly disclosed. They emphasized that a revocable trust cannot replace a secured commitment from a significant shareholder.

Paramount has made six attempts at acquiring the entirety of Warner Bros studio and associated networks, with the Ellison family trust reportedly holding over $250 billion in assets. Despite this, Warner Bros has cast doubt on Paramount’s financial stability, specifically questioning the terms and feasibility of their financing structure.

Following the rejection, Wall Street reacted swiftly, with shares of Paramount Skydance dropping by 3.8% at the market open. In contrast, Warner Bros Discovery saw a slight decline of 0.4%, while Netflix enjoyed an uptick of 2.8%.

Conclusion

The ongoing struggle between Warner Bros Discovery and Paramount Skydance underscores a crucial moment in the evolving landscape of media acquisitions, with stakes significantly impacting shareholders and industry players alike. As the drama unfolds, both companies will need to navigate complex financial terrain and shareholder expectations to reach favorable outcomes.