Paramount Backs WBD Deal, Warns Against Netflix-Backed Outcome

Paramount seem to be sticking to its current plan to buy Warner Bros. Discovery, cautioning investors that accepting Netflix’s bid would leave them with a “heavily indebted, sub-scale linear business.”

And despite the WBD board’s unanimous recommendation that shareholders reject its $30-per-share all-cash aggressive takeover offer, Paramount, a Skydance subsidiary, reiterated its commitment to the acquisition.

Shortly after WBD’s board of directors recommended against the Paramount option, the media company run by David Ellison, the son of mega billionaire Oracle Founder Larry Ellison expressed its stance in a press release on Wednesday. Although it is generally anticipated that Wednesday’s crossing of swords could lead to a fresh round of competitive bidding, pushing the final acquisition price even higher, neither side has altered the terms of their agreement.

The hostile offer made by Paramount last week, made to purchase all of WBD for $108 billion, including debt. In a deal valued at around $83 billion, Netflix has agreed to acquire solely the Warner studio and streaming operations.

The Netflix agreement takes into consideration Discovery Global Networks’ anticipated separation from the rest of WBD in 2019. In the meantime, Paramount is prepared to take on the problematic cable network aspect of the company. One major distinction between the bids has been how to value the networks.

Paramount stated in a news release on Wednesday that because it offers “the certainty of 100% cash and no exposure to equity market fluctuations,” its proposal should win. (The value of Netflix shares has already fallen below the “collar” outlined in the merger plan; Netflix’s deal includes some stock.)

Paramount stated that it had “high confidence” in obtaining “timely” regulatory approval. The agreement, according to the business, “would enhance competition in the creative industries rather than entrench a dominant streaming monopoly that the Netflix transaction envisions.”

Paramount stated that it has “lined up all necessary financing to deliver its offer to WBD shareholders, and it is not subject to any financing conditions” in response to WBD’s complaint that its bid is “illusory” and lacks complete commitment from the Ellison family. The Ellison family and RedBird Capital, along with $54 billion in debt commitments from Bank of America, Citi, and Apollo, will provide $41 billion in additional equity to finance the offer, according to the business.

Ellison stated that the Paramount partners “remain committed to bringing together two iconic Hollywood studios to create a unique global entertainment leader.” “Our proposal does not leave WBD shareholders with a heavily indebted sub-scale linear business, and it offers them superior value and certainty as well as a clear path to closure.” The comments we have got from WBD shareholders, who are obviously aware of the advantages of our offer, has given me hope. It is in the best interests of WBD shareholders, customers, and the creative industries, thus we will keep moving forward to complete this transaction.

Paramount noted that WBD’s “own narrative of the actions that led to its inferior transaction with Netflix reveals a process which was not run to secure the best offer for WBD shareholders” in response to the company’s earlier Wednesday SEC filing. Above all, WBD’s lack of involvement with Paramount in the face of a better all-cash $30 per share offer speaks for itself.

With the current status, Jared Kushner’s Affinity Partners recently pulled out of Paramount’s proposal, although it said it still supported the offer’s strategic justification.

Mario Gabelli and other significant investors have said they are “highly likely” to tender their shares to Paramount, indicating a possible protracted battle.