Warner Bros. Discovery’s board of directors have confirmed receipt and said they would “carefully review and consider” Paramount Skydance’s $30 per share tender offer to acquire the entire company.
“The Board is not modifying its recommendation with respect to the agreement with Netflix. Warner Bros. Discovery intends to advise its stockholders of the Board’s recommendation regarding Paramount Skydance’s tender offer within 10 business days,” the company said in a statement. “Warner Bros. Discovery stockholders are advised not to take any action at this time with respect to Paramount Skydance’s proposal.”
The tender offer will be open for 20 business days and WBD’s board will need to respond with a recommendation within 10 business days. Following the 20 business days, Paramount has the option to extend the offer.
The all-cash tender offer from the David Ellison-led media giant would be $18 billion more and 29% more cash than Netflix’s $82.7 billion deal, amounting to an enterprise value of $108.4 billion. It includes over $41 billion of equity and $54 billion in committed debt financing and is fully backstopped by the Ellison family, whose family trust has over $250 billion in Oracle stock.
Paramount’s partners in the bid include RedBird Capital Partners, Bank of America, Citibank, Apollo Global Management and three Middle Eastern sovereign wealth funds, the latter of which are putting up $24 billion of that financing. Approximately $17 billion is reserved to allow Warner Bros. Discovery to extend its bridge loan.
If approved, the combined Paramount-WBD would target $6 billion in cost savings aimed at areas such as back office, finance, corporate, legal, technology and infrastructure. It would also have $70 billion in revenue, $16 billion in EBITDA, $10 billion in cash flow, 207 million streaming subscribers and target over 30 theatrical releases per year.
“This transaction is about building more, not cutting back, more opportunity for the industry, more choice for consumers, more value for shareholders, and more support for creative talent,” Ellison told analysts on Monday. “Our focus is on expanding creative output, not dominating the sector as Netflix envisions. Our goal is to make Hollywood stronger in a way that benefits the entire ecosystem.”
Paramount has argued that the Netflix-Warner Bros. deal would “solidify streaming domination and end the streaming wars.” They also said it would be “harmful to the film and TV industry, undermine creative talent, threaten higher prices for consumers, and threaten the future of theatrical releases.”
Additionally, they argued that the Netflix offer leaves shareholders with stock and a “highly levered global networks business,” exposes them to “volatile Netflix shares that can drive value below headline levels” and has a “highly uncertain regulatory outlook.”
Ellison added that Paramount addressed all of the Warner Bros. Discovery board’s concerns by increasing the value, strengthening the financing and enhancing the regulatory commitments of its bid, but ended up receiving no response. It added that its previous bid was “not best and final.”
“We’re taking our offer directly to shareholders because they deserve transparency and the ability to make an informed decision,” he continued. “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. We’re confident that once shareholders have the opportunity to choose for themselves, they’ll choose Paramount.”
Shares of Warner Bros. Discovery are up 3% during Monday’s trading session, trading at $26.88 apiece. The stock is up 10.7% in the past five days, 16.9% in the past month, 182% in the past six months, 152% year to date and 154% in the past year.
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