①Warner Bros. Exploration Netflix's board of directors rejected Paramount Skydance's $108.4 billion all-cash hostile takeover offer, believing that Netflix... The acquisition plan is more attractive; ② Warner questioned the credibility of Paramount's equity financing and the Ellison family's financial structure, pointing out that Paramount's offer valuation was insufficient and risky.
Warner Bros. Discovery 's board of directors on Wednesday rejected Paramount Skydance's $108.4 billion all-cash hostile takeover bid, saying it found Netflix 's offer for the company's film assets and HBO streaming business to be more attractive.
Following this news, Warner Bros. Discovery fell 1.3% pre-market, Paramount Skydance fell more than 2%, and Netflix rose about 2%.
In a letter to shareholders, Warner described Paramount's offer as "illusory and unrealistic" and again questioned the credibility of the equity financing offered by Paramount, while pointing out obvious problems with the structure by which the Ellison family financed the deal.
Warner Chairman Samuel Di Piazza stated, "After careful evaluation of Paramount's recent takeover bid, the Board has determined that the offer is undervalued and would pose significant risks and costs to shareholders."
Paramount CEO David Ellison and his father, billionaire Larry Ellison, along with Redbird Capital, are the controlling shareholders of Paramount.
Earlier this month, Netflix agreed to acquire Warner Bros.' Legendary Studios and HBO streaming business, which were retained after the company was split into two, for $72 billion in cash and stock, or $27.75 per share.
Subsequently, Paramount launched a hostile takeover bid, offering $30 per share in cash to acquire all outstanding shares of Warner Bros. Discovery, valuing the company at $108.4 billion. Paramount has consistently maintained that its proposal is more valuable to shareholders and has a higher chance of passing antitrust scrutiny.
In its letter to shareholders, Warner stated that the Ellison family planned to finance the transaction through a revocable trust, and that Paramount's documentation regarding the funding commitment contained "gaps, loopholes, and numerous restrictions," potentially exposing Warner and its shareholders to significant risks.
"Despite the Ellison family's substantial financial resources and Paramount's repeated assurances of such commitments during the strategic review process, the family ultimately chose not to provide a safety net for Paramount Skydance's offer."
In contrast, Warner pointed out that Netflix's deal was fully backed by a publicly traded company with a market capitalization of over $400 billion and an investment-grade balance sheet, making the source of funding clearer and more certain.
In its letter, Warner stated, "Netflix's terms are clearly superior, and Paramount's offer is not only undervalued but will also bring the company several significant risks and additional costs."
Paramount's hostile takeover offer was $30 per share, but the company also told Warner that this was not its "final and best offer," suggesting there was still room for an upward adjustment.
Paramount's initial acquisition offer also included funding from three Gulf sovereign wealth funds, as well as Affinity Partners, the firm of former White House senior advisor Jared Kushner. However, as of Tuesday, Affinity was no longer involved in the deal.
A spokesperson for Affinity said, "The dynamics of the investment arrangements have changed significantly since we initially got involved in October." But he added that the company still believes Paramount's proposal has a "strong logic" at the strategic level.
Paramount's takeover bid expires on January 8, but an extension is possible. Paramount has repeatedly stated that Warner Bros.' lack of communication has prevented it from further refining its offer.
In response, Warner stated on Wednesday that its board of directors had repeatedly contacted all relevant parties, held dozens of conference calls and face-to-face meetings with Paramount management and the Ellison family, raised specific concerns about the financing structure, and gave them multiple opportunities to revise the proposal.
Warner also stated that its board of directors believes there is "no material difference" between the Paramount proposal and the Netflix deal in terms of regulatory approval risks.
Netflix welcomed the Warner Bros. board's recommendations on Wednesday. Netflix co-CEO Ted Sarandos stated, "Netflix and Warner Bros. explore complementary strengths, and we are excited to combine our advantages with their theatrical film division, world-class television studio, and the iconic HBO brand, which will continue to focus on premium television series."
(Article source: CLS)
