Payne Capital Management president Ryan Payne joins Mornings with Maria to discuss Warner Bros. It gets Paramounts aggressive bid rejection amid Netflixs attempts to buy the media giant and more.
Warner Bros. Discovery announced on Wednesday that its board had unanimously rejected Paramount’s bid, saying it was not in the best interest of shareholders and that Netflix was the preferred partner.
Netflix agreed last year to acquire the film and television studios of Warner Bros. Discovery and streaming platform HBO Max in a cash and stock deal worth $27.75 per Warner Bros. share. Discovery. Paramount, the Skydance Corporation, then launched an aggressive takeover bid for all of Warner Bros. Discovery, including the cable legacy Netflix left behind.
WBD Board of Directors Chairman Samuel A. Di Piazza Jr., reiterated the board’s recommendations in support of the Netflix deal and recommended that shareholders reject Paramount’s offer.
“The board unanimously decided that Paramount’s latest offer remains subject to our merger agreement with Netflix in several key areas,” Di Piazza said.
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Warner Bros. Discovery announced on Wednesday that its board had unanimously rejected Paramount’s tender offer. (Photos by Mario Tama/Getty/Getty Images)
“Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt capital that creates a risk of foreclosure and a lack of protection for our shareholders if the transaction is not completed,” continued Di Piazza. “Our binding agreement with Netflix will provide the highest value in terms of guarantees, without the significant risks and costs that Paramount would impose on our shareholders.”
A letter explaining the board’s position was also sent to shareholders.
“PSKY’s offer is lower given the significant costs, risks and uncertainties compared to the Netflix merger. Under the Netflix merger agreement, WBD shareholders will receive a significant value of $23.25 in cash and shares of Netflix common stock representing a target price of $4.50 based on the range of the collar on the Netflix stock price, where the board writes the future value.
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Paramount CEO David Ellison announced an aggressive takeover bid for Warner Bros. Discovery on 8 Dec. (Charly Triballeau/AFP via Getty Images/Getty Images)
“The board also considered the costs and loss of value to WBD shareholders related to accepting PSKY’s offer. WBD will be obligated to pay Netflix a termination fee of $2.8 billion for leaving our existing merger agreement; receive $1.5 billion in cash for failing to complete our debt swap, which we cannot use under PSKY’s payment without PSKY’s approval of $30;50 million in costs,” they continued. “The total costs to WBD would be approximately $4.7 billion, or $1.79 per share. These costs would, in effect, reduce the total amount of severance money PSKY would pay to WBD from $5.8 billion to $1.1 billion in the event of a failed transaction with PSKY. In comparison, Netflix’s transaction of these costs does not deceive WBD.”
The letter went on to suggest that Paramount’s offer reflects an “unusual amount of debt capital” that increases “the risk of failure to close, especially compared to the certainty of the Netflix merger.”
“Your board has discussed a merger with Netflix that maximizes value while minimizing risk, and we unanimously believe that the Netflix merger is in your best interest. We are focused on optimizing the Netflix merger to bring you its compelling value,” the board wrote.
Paramount did not immediately respond to a request for comment.
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