Warner Bros fight heats up with $140.7 billion hostile bid from Paramount
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Paramount’s latest attempt means the jockeying for Warner Bros and its prized assets will not come to a conclusion swiftly.
PHOTO: AFP
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Paramount Skydance on Dec 8 launched a hostile bid worth US$108.4 billion (S$140.7 billion) for Warner Bros Discovery (WBD), in a last-ditch effort to outbid Netflix and create a media powerhouse that would challenge the dominance of the streaming giant.
Netflix had emerged victorious on Dec 5 from a weeks-long bidding war
Paramount’s US$30-per-share cash offer includes financing from Affinity Partners, the investment firm run by Mr Jared Kushner, US President Donald Trump’s son-in-law, and several Middle Eastern government-run investment funds, and is backstopped by the Ellison family.
Mr Larry Ellison, the world’s second-richest person, is the father of Paramount head David Ellison and has close ties to the White House.
The studio argues its bid for the entirety of Warner Bros Discovery is superior to Netflix’s bid, providing shareholders US$18 billion more in cash and an easier path to regulatory approval.
It also argued that Paramount-Warner Bros combination would be in the best interest of the creative community, movie theaters and consumers, who would benefit from enhanced competition.
“We believe our offer will create a stronger Hollywood,” Paramount chief executive David Ellison said in a statement.
Mr Ellison said on several occasions on Dec 8 Paramount’s bid includes Warner Bros Discovery’s cable television properties; Netflix’s bid is limited to the Warner Bros film and television studios, HBO and the HBO Max streaming service.
Analysts noted that Paramount’s offer comes with its own antitrust scrutiny as a consolidation of two major television operators.
In November, Democratic senators warned that such a transaction would result in “one company controlling almost everything Americans watch on TV.”
The combined studio would also have a greater market share than current leader Walt Disney Co, and add to fears of consolidation that have hit the industry hard in recent years. The offer represents a 139 per cent premium over the company’s undisturbed stock price, and bests Netflix’s US$27.75 offer that mixes cash and stock.
Kushner, Saudis part of Paramount offer
Warner Bros Discovery and Netflix did not immediately respond to requests for comments on Paramount’s deal.
In a regulatory filing, Paramount said that the Ellison family, which owns Paramount, along with private equity firm RedBird Capital, had agreed to backstop US$40.7 billion in equity capital.
The offer also includes financing from Kushner’s Affinity Partners, the Saudi and Qatari sovereign wealth funds, and L’imad Holding Co, owned by the government of Abu Dhabi.
Netflix’s offer comes with a US$5.8 billion break-up fee and was likely to face strong antitrust scrutiny; US President Donald Trump raised questions about the offer
“While it is perhaps a sad commentary on the US that Paramount thinks its closeness to the occupant of the Oval Office will help it seal the deal, it is merely doing what it can to steal a march on its rival,” said Mr Chris Beauchamp, chief market analyst at UK-based IG Group.
Shares of Paramount were up 7.7 per cent on Dec 8. Warner Bros Discovery rose 5 per cent, while Netflix shares fell 4.5 per cent.
One company that appears to be out of the running is NBCUniversal parent Comcast, whose president Mike Cavanaugh said the company was not interested in taking its balance sheet to “any stressful level” to buy Warner Bros.
Twists and turns
Reuters had already reported, citing sources familiar, that Paramount had raised its offer to US$30 per share on Dec 4 for the entire company, but that the Warner Bros board had concerns about the financing.
Paramount maintained that it would be a champion of Hollywood and its talent, would remain committed to releasing movies in cinemas, and that its path to regulatory approval would be faster than Netflix’s.
“Our proposal is superior to Netflix’s in every dimension, higher headline value, increased certainty in that value, greater regulatory certainty, and a pro-Hollywood, pro-consumer and pro-competition future,” said Mr Ellison.
In its appeal to shareholders, Paramount said it submitted six proposals over the course of 12 weeks, but Warner Bros “never engaged meaningfully” with these proposals.
“The Warner Bros Discovery acquisition is far from over,” said eMarketer senior analyst Ross Benes. “Paramount will appeal to shareholders, regulators, and politicians to try to stymie Netflix. The battle could become prolonged.”
Paramount has argued the combination of its Paramount+ streaming service with Warner Bros’ HBO Max would position it for growth, and create a meaningful competitor to Netflix, Amazon Prime Video or Walt Disney’s Disney+.
‘Bias against us’
The company said it had sent a letter to Warner Bros, questioning the sale process and alleging the company has abandoned a fair bidding process and predetermined Netflix as the winner.
That followed reports that Warner Bros’ management called the Netflix deal a “slam dunk” while speaking negatively about Paramount’s offer.
In an interview with CNBC on Dec 8, Paramount chief executive David Ellison said there was an “inherent bias” in the bidding.
Bloomberg News has reported Mr Trump met Netflix co-chief executive Ted Sarandos in mid-November, telling the executive Warner Bros should sell to the highest bidder. In his CNBC interview on Dec 8, Mr Ellison said he had “great conversations” with Mr Trump, but did not characterise the discussions.
Looking to allay antitrust fears, Mr Sarandos had said the deal would drive value for consumers, shareholders and talent, saying Netflix is “highly confident” in the regulatory process. REUTERS
