(Jan 9): Paramount Skydance Corp reaffirmed its offer to buy Warner Bros Discovery Inc, insisting its US$30 ($38.57)-a-share bid is superior to one from Netflix Inc in part because the rival deal would hand investors stock in a cable TV spin-off that Paramount deems worthless.
Paramount’s offer “represents the best path forward” for Warner Bros shareholders, Paramount said in a statement on Thursday. The company has “cured every issue raised” by Warner Bros, most notably by providing an irrevocable personal guarantee by billionaire Larry Ellison, it said, for US$40.4 billion in equity financing.
Much of the debate in the monthslong battle has focused on the value of Warner Bros cable networks like TNT and CNN, which have been losing viewers and advertisers as consumers shift to streaming. Netflix is only acquiring the Warner Bros studios and streaming businesses, and under its plan Warner Bros shareholders will receive stock in a new entity called Discovery Global that will own the cable channels.
Paramount said the poor market debut of Versant Media Group Inc, the cable networks spun out of Comcast Corp, suggests Warner Bros investors will end up with less if they stick with the Netflix deal. Versant shares have fallen about 26% in their first few days of trading this week. The market’s valuation of Versant, along with the US$15.1 billion in debt the Warner Bros spin-off will carry, leads Paramount to value Discovery Global’s shares at zero, according to the statement.
Versant’s “performance to date illustrates the challenged path ahead for Discovery Global”, Paramount said.
On Wednesday, Warner Bros again rejected an amended takeover offer from Paramount, expressing scepticism about the financing of the deal and the substantial debt it would entail. The Warner Bros board said in a letter to shareholders that it has doubts that Paramount would be able to close the deal and that its proposal carries significant risks and uncertainties compared with Netflix’s offer of US$27.75 per share in cash and stock for Warner Bros’ studios and streaming business.
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Paramount is competing with Netflix for control of one of Hollywood’s most storied studios, the home of franchises like Batman and Harry Potter as well as HBO, one of the crown jewels of TV. Despite submitting multiple offers, its attempts have been repeatedly rebuffed.
Warner Bros chairman Samuel DiPiazza said in an interview on CNBC on Wednesday that in addition to financing concerns about Ellison’s bid, “ultimately, he didn’t raise the price. So in our perspective, Netflix continues to be the superior offer”.
Paramount also argued on Thursday that the value of Netflix’s offer has decreased due to declines in the streaming giant’s share price. Netflix’s proposal is comprised of US$23.25 in cash and US$4.50 in Netflix stock.
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“Our offer clearly provides WBD investors greater value and a more certain, expedited path to completion,” said David Ellison, the chief executive officer of Paramount, in the statement. “Throughout this process, we have worked hard for WBD shareholders and remain committed to engaging with them on the merits of our superior bid and advancing our ongoing regulatory review process.”
Shares of Netflix and Warner Bros were down less than 1% on Thursday, while Paramount’s rose slightly.
Alex Fitch, a portfolio manager at Harris Associates, Warner Bros’ fifth-largest shareholder, said Paramount needs to raise its bid to get Warner Bros to reconsider the Netflix deal.
“If they come back to the table with a clearly superior offer, we have full confidence that the WBD board will engage,” he said in an email.
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