Warner Bros Discovery’s Board Rejects Paramount’s Hostile Offer
Warner Bros Discovery’s (WBD) board has urged its shareholders to reject an amended hostile offer from Paramount, while maintaining its unanimous support for a rival offer from Netflix. The board stated that Paramount’s updated $108.4 billion cash offer for the entire company included an "extraordinary amount of debt financing" that posed a risk to completing any deal.
Details of the Offers
Paramount’s offer was made directly to WBD shareholders, as the board had already pushed for Netflix’s $72 billion cash and stock offer in early December. The Netflix offering includes WBD’s television and film studios, their respective back catalogs, including Harry Potter and Game of Thrones, as well as the streaming service HBO Max.
Paramount’s Case
Paramount made its case to WBD investors, stating that the offer was "superior" and provided a "safer and faster path to closing." David Ellison, Paramount’s chairman and CEO, said that the public offer was made on the same terms as the private presentation to the Warner Bros. Discovery board.
WBD Board’s Response
The WBD board reiterated its continued support for the Netflix offer and rejected Paramount’s claims that the offer was "superior." The board stated that the Paramount financing plan would saddle the smaller Hollywood studio with $87 billion in debt, and that the revised offer remained inadequate due to "the insufficient value it would provide, the lack of certainty regarding PSKY’s ability to complete the Offer, and the risks and costs that WBD shareholders would bear if PSKY did not complete the Offer."
Comparison of Offers
While Netflix’s offer has less headline value, financial analysts note that it has a clearer financing structure and fewer execution risks than Paramount’s offer for the entire company, including its cable TV business. The cash and stock deal offered by Netflix is worth $27.75 per Warner share, compared to Paramount’s offer of $30 per share. WBD shares are currently trading around the $28 per share mark.
Conclusion
The WBD board has made it clear that it prefers the Netflix offer, citing its clearer financing structure and fewer execution risks. The board has urged shareholders to reject the Paramount offer, stating that it poses a risk to completing the deal due to the "extraordinary amount of debt financing" involved.
