Paramount Skydance on Thursday reiterated that its $108.4 billion bid for Warner Bros. Discovery was higher than a rival deal from Netflix, saying the cable spinoff’s mid-range offer from the streaming giant was irrelevant.
Warner Bros. Discovery’s board on Wednesday rejected Paramount’s hostile amended proposal that included $40 billion in equity personally guaranteed by Oracle founder Larry Ellison, who is the father of Paramount CEO David Ellison, and $54 billion in debt.
Parent CBS and Netflix have been in a heated battle for Warner Bros., its prized film and television studios, and a content library that includes “Harry Potter” and the DC Comics universe.
Paramount’s argument – one it uses to woo investors – is that its all-cash offer of US$30-per-share for all of Warner Bros is higher than Netflix’s US$27.75 share of cash and stock for streaming programs and streaming assets and will easily clear regulatory hurdles. The Netflix deal is worth $82.7 billion.
In its response Thursday, Paramount went so far as to suggest that the cable properties of CNN and Discovery, which Netflix does not want, are worth less than nothing, based on the valuation of newly floated Versant Media, a Comcast spinoff that includes digital assets and TV stations such as CNBC. That stock is down 18 percent since it went public on Monday.
That sour performance gave new ammunition to Paramount’s campaign to convince Warner Bros. shareholders that its offering was better. On Thursday, it said it values Warner Bros. cable’s pitch to zero — or less, because of its high ratings and remaining performance.
“Although Discovery Global equity would not be valued at equity if the company traded in line with Versant, there are actually several compelling reasons why it should trade at a discount to Versant,” Paramount said Thursday.
Paramount said the Netflix offer would reduce the amount paid out to shareholders if Warner Bros. loaded more debt into the merger. The company says the cash payout could drop to $20 per share, from the current offer of $23.25, if Warner Bros. were to exercise the power associated with Versant.
Warner Bros. did not immediately respond to a request for comment. Netflix cited its statement on Wednesday as saying the offer is the best deal and will deliver the greatest value.
Shares of Warner Bros and Netflix were down less than 1 percent each, while those of Paramount rose 0.6 percent.
“It would be surprising if shareholders were moved by the dispute because they may have already considered the decline in the value of TV assets when they agreed to split the company and sell a growing part to Netflix,” said Ross Benes, senior analyst at eMarketer.
“But Paramount has a point – dying TV networks are not attractive to many investors.”
Paramount’s tender will expire on January 21, but the company can extend it.
Warner Bros not convinced by ‘insufficient’ bid
Warner Bros argued that Paramount’s revised offer of December 22 “remains inadequate”, citing uncertainty about the CNN parent’s ability to complete the deal, and the exposure of Warner Bros shareholders to significant risks and costs should the deal fail.
The board said Paramount’s offer was subject to a “credit windfall” that increased the risk of foreclosure.
The Netflix deal requires no financing and is backed by US$59 billion in debt from banks including Wells Fargo, BNP Paribas and HSBC Holdings.
Warner Bros. also said it would owe Netflix a $2.8 billion severance fee if it splits from the deal, which is part of the $4.7 billion in additional costs to end the deal.
Paramount did not offer to pay the costs Thursday.
Warner Bros. Chairman Samuel Di Piazza said the company is not currently negotiating with Paramount but is open to a deal if Paramount “can put something on the table that is compelling.”
Some Warner Bros. investors, including 7th-largest shareholder Pentwater Capital, argued that the board made a mistake in not getting involved with Paramount.
Regulatory processing
For any suitor, winning shareholder support is only the first hurdle for a deal that could face tough scrutiny from antitrust regulators in the US and Europe.
Bipartisan lawmakers have raised concerns about potential risks to consumers and creators and US President Donald Trump has said he plans to reconsider the deals.
Paramount’s bid would create a studio bigger than market leader Disney and combine the two biggest TV operators, which some Democrats say would control “virtually everything Americans watch on TV”.
Separately, Paramount is looking for strategic partners to help revitalize MTV, making it more than just a cable network, Bloomberg News reports.
For Netflix, Hollywood’s lightning rod in its original form of streaming, the deal will strengthen its dominance with 428 million subscribers. It promised to honor Warner Bros.’s theatrical commitments.
