Warner Bros Discovery (WBD) has again told its shareholders to reject an “inadequate” $108.4bn (£80bn) hostile takeover bid by Paramount Skydance amid an extraordinary corporate battle to control the media conglomerate.
Paramount, controlled by the billionaire Ellison family, had sought to combat WBD’s criticism of its offer and claims it had “consistently misled” investors by saying it had a “full backstop” – a safety net to ensure it has sufficient funds – from the Ellisons.
Larry Ellison, co-founder of Oracle, last week agreed to provide a personal guarantee worth more than $40bn. Paramount said this was in an attempt to tackle WBD’s “amorphous need” for financial flexibility.
Paramount is fighting to unravel the $82.7bn deal that WBD has agreed with Netflix, through which the world’s largest streaming service is aiming to acquire WBD’s storied movie studios, HBO cable network and HBO Max streaming service.
Unlike Netflix, Paramount has bid for the entire company – which also includes CNN, the Cartoon Network and the Discovery Channel. But WBD’s board has argued its bid was “inadequate”, with “significant” risks and costs.
“Your board unanimously determined that the amended offer remains inadequate particularly given the insufficient value it would provide, the lack of certainty in Paramount Skydance’s ability to complete the offer, and the risks and costs borne by WBD shareholders should Paramount Skydance fail to complete the offer,” WBD said in a letter to shareholders on Wednesday.
In a filing accompanying the letter, WBD called the hostile bid, even with the new Ellison backstop, the “largest LBO [leveraged buyout] in history”, a structure that poses risks to the offer.
Under the terms of its deal with Netflix, WBD would have to pay a $2.8bn breakup fee if it walked away from the agreement.
Paramount Skydance’s revised offer alsoinvolved increasing its termination fee to $5.8bn, matching Netflix.
The Netflix deal for the Warner Bros studios, HBO and HBO Max, and Paramount’s approach for all of WBD, are widely expectedly to face strong regulatory scrutiny. Prominent lawmakers and entertainment industry operators have expressed concern, and Donald Trump indicated that he intends to be involved.
Ted Sarandos and Greg Peters, co-CEOs of Netflix, said: “The WBD board remains fully supportive of and continues to recommend Netflix’s merger agreement, recognising it as the superior proposal that will deliver the greatest value to its stockholders, as well as consumers, creators and the broader entertainment industry.
“Netflix and Warner Bros will bring together highly complementary strengths and a shared passion for storytelling. By joining forces, we will offer audiences even more of the series and films they love – at home and in [cinemas] – expand opportunities for creators, and help foster a dynamic, competitive, and thriving entertainment industry.”
