Warner Bros. Discovery rejects Paramount’s “inferior” $108 billion bid to acquire the storied studio
The ongoing battle for Warner Bros. Discovery continues to rage after reports that WBD has officially rejected David Ellison’s $ 30-per-share aggressive bid for the storied company, with WBD stating that Paramount‘s deal remains “inferior” to the Netflix arrangement. While addressing the matter, WBD noted that Ellison’s offer would come with “numerous significant risks and costs on WBD.”
With the hammer officially coming down on the offer, Paramount must persuade WBD shareholders to tender their shares at that price, or to submit a higher bid than its $108 billion offer.
Why was Paramount’s offer struck down?
“Following a careful evaluation of Paramount’s recently launched tender offer, the Board concluded that the offer’s value is inadequate, with significant risks and costs imposed on our shareholders,” said Samuel A. Di Piazza, Jr., chair of the Warner Bros. Discovery board of directors, in a statement. “This offer once again fails to address key concerns that we have consistently communicated to Paramount throughout our extensive engagement and review of their six previous proposals. We are confident that our merger with Netflix represents superior, more certain value for our shareholders and we look forward to delivering on the compelling benefits of our combination.”
The rejection did not come as a surprise, given that Paramount’s offer is essentially the same one it made to WBD on December 4, before accepting Netflix’s offer. Reports indicate that foreign financing is a significant concern for the pact, in addition to whether Ellison would backstop the deal. According to WBD, a backstop from Larry Ellison’s revocable trust is insufficient because the assets and liabilities aren’t disclosed, and assets from the trust can be transferred or altered. WBD also expressed concerns about portions of Paramount’s offer, including the Middle East sovereign funds, particularly regarding Saudi Arabia’s Public Investment Fund’s $10 billion contribution. WBD also raises concerns about Abu Dhabi’s contribution of $7 billion and Qatar Investment Authority’s contribution of $7 billion.
“He guaranteed it through an irrevocable trust at the last minute, and frankly, that wasn’t as good as an investment grade company that purported strong value, great response to our concerns of what it took to operate,” Di Piazza said on CNBC. “I have enormous respect, as does the board, for the Ellison family and for the Paramount company, they just didn’t measure up on these bids.”
What happens next?
With WBD officially rejecting Paramount’s bid, Ellison’s company has a chance to regroup and return with a higher bid, allowing Netflix to match the amount or counteroffer, effectively reigniting the bidding war. While the situation remains in flux, Netflix maintains that it’s the optimal choice, saying its agreement “is the right deal, with the right partner, at the right time.”
“The Warner Bros. Discovery Board reinforced that Netflix’s merger agreement is superior and that our acquisition is in the best interest of stockholders,” said Ted Sarandos, Netflix’s co-CEO. “This was a competitive process that delivered the best outcome for consumers, creators, stockholders and the broader entertainment industry. Netflix and Warner Bros. complement each other, and we’re excited to combine our strengths with their theatrical film division, world-class television studio, and the iconic HBO brand, which will continue to focus on prestige television. We’re also fully committed to releasing Warner Bros. films in theaters, with a traditional window, so audiences everywhere can enjoy them on the big screen.”
According to Ellison, he made it clear to WBD CEO David Zaslav that Paramount is willing to go higher than $30 a share before submitting the company’s latest bid.
Netflix remains hopeful it can win the bidding war
“I don’t want to speculate on what’s going to happen from here,” Netflix co-CEO Greg Peters told CNBC on Wednesday. “We are pretty happy that we’ve presented a pretty strong deal. And I think the Warner Bros. Discovery Board sent a pretty clear message that they believe that this is the best value. It’s the most certain path forward. Our deal structure is clean, it’s certain.”
How do you think this merger will end? Will Netflix emerge victorious, or will Paramount’s counteroffer be too sweet to deny? Let us know what you think in the comments section below.
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