Warner Bros. Discovery’s board has confirmed receipt of Paramount’s amended all-cash, $30 per share bid for the entire company.
“The Warner Bros. Discovery Board of Directors, consistent with its fiduciary duties and in consultation with its independent financial and legal advisors, will carefully review and consider Paramount Skydance’s offer in accordance with the terms of Warner Bros. Discovery’s agreement with Netflix, Inc,” the company said in a statement.
On Monday, Oracle co-founder Larry Ellison has agreed to provide an “irrevocable personal guarantee” of $40.4 billion of the equity financing for Paramount’s $108.4 billion bid for Warner Bros. Discovery and any damages claims against Paramount.
Ellison also agreed not to revoke the family trust or “adversely transfer” its assets while a transaction is pending. Additionally, Paramount published records to confirm the that the Ellison family trust owns approximately 1.16 billion shares of Oracle common stock, as well as all of its material liabilities.
It also raised its breakup fee from $5 billion to $5.8 billion in the event the deal doesn’t secure regulatory approval and offered improved flexibility for WBD on “debt refinancing transactions, representations and interim operating covenants.”
The amended offer is conditional, among other things, on WBD continuing to own 100% of its global networks business. All other terms and conditions of the offer remain unchanged.
The amended offer comes after WBD’s board unanimously rejected its all-cash, $30 per share bid, calling it “inadequate” and “illusory.” The bid marked its sixth proposal made over the course of twelve weeks.
Paramount’s sixth bid includes a total of $40.7 billion in equity financing, including $11.8 billion from the Ellison family and $24 billion from Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority and Abu Dhabi’s L’imad Holding Company, according to a filing with the U.S. Securities and Exchange Commission. Kushner’s Affinity Partners had contributed $200 million prior to backing out, according to the New York Times.
The Ellisons and Gerry Cardinale’s RedBird Capital Partners have said they previously agreed to fully backstop 100% of the equity financing through the Ellison family trust.
It also includes $54 billion in committed debt financing from Bank of America, Citibank and Apollo Global Management. Roughly $17 billion had been reserved to allow WBD to extend an existing bridge loan.
Among the board’s concerns were that the Ellison family has “consistently misled” WBD shareholders that the $40.7 billion of equity financing in its proposed transaction is fully backstopped by the Ellison family. At the time, they argued that the revocable trust is “no replacement for a secured commitment by a controlling stockholder” and that its assets and liabilities are “not publicly disclosed and are subject to change.”
The board also argued that the bid relies on “the credit worthiness of a $15 billion market cap company with a credit rating at or only a notch above ‘junk’ status from the two leading rating agencies” and that its $9 billion in proposed synergies are “both ambitious from an operational perspective and would make Hollywood weaker, not stronger.”
Additionally, they said that the offer can’t be completed by its current expiration date due to the need for, among other things, global regulatory approvals — and the company and shareholders would face $4.3 billion in costs in the event it doesn’t close. Paramount has maintained its deal would close within a year, while Netflix has said its deal would close in 12 to 18 months.
“Nothing in this structure offers WBD shareholders any deal certainty. The PSKY offer provides an untenable degree of risk and potential downside for WBD shareholders,” the board concluded. “We look forward to moving ahead with our combination with Netflix and delivering the compelling and certain value it will create for shareholders.”
In addition to the amended offer, Paramount has extended the deadline for its tender offer to 5 p.m. ET on Jan. 21. The company said that 397,252 shares had been validly tendered and not withdrawn from the tender offer as of 6 p.m. ET on Dec. 19. Without board approval, Paramount would need at least 90% of WBD’s outstanding shares for its tender offer to be successful. WBD has approximately 2.48 billion outstanding shares.
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