Larry Ellison personally guarantees $52 billion for Paramount’s Warner Bros bid

NEW YORK – Mr Larry Ellison is throwing his personal fortune behind

Paramount Skydance’s bid for Warner Bros Discovery

, aiming to give his son’s company an advantage in a fiercely contested takeover battle with Netflix.

The 81-year-old co-founder and chairman of Oracle agreed to provide an irrevocable personal guarantee of US$40.4 billion (S$52 billion) in equity financing for the offer and any damages claims against Paramount, according to a statement.

Both suitors moved on Dec 22 to strengthen the financial backing for their offers, though they stopped short of increasing their bids. Netflix refinanced a portion of its planned US$59 billion of debt as a way to ensure a lasting investment-grade rating – a key advantage it holds over the lower-rated Paramount.

But it is the personal guarantee of Mr Ellison, the world’s fifth-richest person with a US$246 billion fortune, that could force a rethink by Warner Bros.

The board previously urged shareholders to reject Paramount’s offer in part because the billionaire father of its chief executive David Ellison had backed the US$40.4 billion of equity financing with a revocable trust that could, as the name implies, be withdrawn or amended at any time.

In its Dec 22 statement, Mr Larry Ellison agreed not to revoke the family trust and to keep its assets in place while the Warner Bros transaction is pending.

Warner Bros confirmed receipt of Paramount’s amended offer and said it will evaluate the proposal. The company said it was not modifying its position supporting the competing Netflix offer.

Paramount has been aggressively pursuing Warner Bros for months, and Mr Ellison was taken by surprise when the board agreed to a deal with Netflix for US$82.7 billion for the streaming and studio assets.

The strength of the financing for each bid has emerged as a decisive issue in the takeover battle, which unleashed two massive debt-fuelled offers that rank among the largest in the past decade. Paramount took its offer of US$30 a share, or US$108.4 billion including debt, for the entire company directly to shareholders.

Paramount also offered to increase its regulatory reverse termination fee to US$5.8 billion from US$5 billion. Warner Bros would have to pay US$2.8 billion to Netflix if it backs out of its deal and goes with another suitor.

Mr Ellison’s personal guarantee gives Paramount a critical boost to its financing, some market participants say. Warner Bros’ reason for opposing the bid “is dissipating fast”, said Mr Louis Navellier, chief investment officer at Navellier & Associates.

“To take a bid that’s less valuable because you question a trust is totally bogus,” he said. “The debt is not an issue because of the full faith and credit of Larry Ellison.”

That still might not be enough to persuade the Warner Bros board, according to an initial analysis by Bloomberg Intelligence, which said the revised termination fee and financing costs still “leave the US$30-a-share bid inferior to Netflix’s”. BLOOMBERG