Paramount Launches Hostile Takeover Offer For Warner Bros. Discovery

David Ellison is clearly not willing to take the L after losing his bid to land Warner Bros. Discovery.

via: Deadline

Paramount today announced it has commenced an all-cash tender offer to acquire all of the outstanding shares of Warner Bros. Discovery for $30 per share, an operation it says equates to an enterprise value of $108.4 billion. The aggressive although not wholly unexpected move is an attempt to pry Warner Bros. out of the arms of Netflix.

“The Paramount offer for the entirety of WBD provides shareholders $18 billion more in cash than the Netflix consideration. WBD’s Board of Directors recommendation of the Netflix transaction over Paramount’s offer is based on an illusory prospective valuation of Global Networks that is unsupported by the business fundamentals,” the company said.

The hostile offer, which takes the case directly and publicly to WBD shareholders, follows a contentious auction that saw the media giant headed by CEO David Zaslav reject successive bids from the David Ellison company and, last Friday, announce a deal with an equity value of $72 billion (enterprise value $82.7 billion enterprise value) to sell the Warner Bros. assets to Netflix for $27.75 a share in cash and stock. WBD would first spin off its linear television business into a separate public company in Q3s of 2026. The would-be partners expect the Warner Bros. deal to take 12 to 18 months to close pending regulatory approval.

Paramount’s proposed transaction is for the entirety of WBD, including the Global Networks segment.

“Paramount’s strategically and financially compelling offer to WBD shareholders provides a superior alternative to the Netflix transaction, which offers inferior and uncertain value and exposes WBD shareholders to a protracted multi-jurisdictional regulatory clearance process with an uncertain outcome along with a complex and volatile mix of equity and cash,” Paramount said.

“WBD shareholders deserve an opportunity to consider our superior all-cash offer for their shares in the entire company. Our public offer, which is on the same terms we provided to the Warner Bros. Discovery Board of Directors in private, provides superior value, and a more certain and quicker path to completion. We believe the WBD Board of Directors is pursuing an inferior proposal which exposes shareholders to a mix of cash and stock, an uncertain future trading value of the Global Networks linear cable business and a challenging regulatory approval process,” said Paramount CEO David Ellison.

“We are taking our offer directly to shareholders to give them the opportunity to act in their own best interests and maximize the value of their shares.”

The offer would be backstopped by the Ellison family — led by Oracle co-founder and billionaire many times over Larry Ellison — and RedBird Capital in addition to $54 billion in debt commitments by Bank of America, Citi and Apollo, said Paramount.

The company said it is highly confident “in achieving expeditious regulatory clearance for its proposed offer, as it enhances competition and is pro-consumer, while creating a strong champion for creative talent and consumer choice. In contrast, the Netflix transaction is predicated on the unrealistic assumption that its anticompetitive combination with WBD, which would entrench its monopoly with a 43% share of global Subscription Video on Demand (SVOD) subscribers, could withstand multiple protracted regulatory challenges across the world. In many European Union countries the Netflix transaction would combine the dominant SVOD player with the number two or strong number three competitor.

“The Netflix transaction creates a clear risk of higher prices for consumers, lower pay for content creators and talent and the destruction of American and international theatrical exhibitors. Netflix has never undertaken large-scale acquisitions, resulting in increased execution risk which WBD shareholders would have to endure,” it said.

Paramount said it had submitted six offers over the course of 12 weeks but “WBD never engaged meaningfully with these proposals … Paramount has now taken its offer directly to WBD shareholders and its Board of Directors to ensure they have the opportunity to pursue this clearly superior alternative,” said Ellison.

“We believe our offer will create a stronger Hollywood. It is in the best interests of the creative community, consumers and the movie theater industry. We believe they will benefit from the enhanced competition, higher content spend and theatrical release output, and a greater number of movies in theaters as a result of our proposed transaction. We look forward to working to expeditiously deliver this opportunity so that all stakeholders can begin to capitalize on the benefits of the combined company.”

The Ellisons and Netflix have both wooed Donald Trump, who last night praised Netflix co-CEO Ted Sarandos but said that the streamer’s heft when combined with HBO Max could be a problem because of their “very big market share.”

Netflix will argue that it’s just one player in a much broader video universe that includes giant YouTube and others.

Paramount said the tender offer — a call for shareholders to tender their shares for cash — expires on Jan. 8 at 5 pm ET unless it is extended.