Doubts Over Paramount's Financing
"Full Acquisition, Unlikely to Pay Entirely in Cash"
Paramount's "White Knight," Trump's Son-in-Law, Withdraws
Board Deems Netflix's Contract Terms More Favorable
The Warner Bros. Discovery Group (Warner Bros.) has decided to reject the hostile takeover bid from Paramount Skydance (Paramount).
According to the Financial Times (FT) on December 16 (local time), the Warner Bros. board of directors is expected to recommend as early as December 17 (local time) that shareholders reject Paramount’s hostile takeover offer. A hostile takeover refers to a proposal made directly to shareholders to acquire shares at a premium, bypassing the management that has decided to sell.
Previously, on December 5, Netflix signed a final agreement to acquire Warner Bros.’ film and TV studios, as well as its streaming service HBO Max, for $72 billion. Channels such as CNN were excluded from the acquisition. Paramount, which had participated in the bidding, proposed to acquire the entire Warner Bros. company for $108 billion, but the Warner Bros. board unanimously chose Netflix.
The Warner Bros. board made this decision because it judged Paramount’s proposal to be unrealistic. Paramount’s financing methods and acquisition terms were deemed less satisfactory than Netflix’s.
Paramount offered to pay $30 in cash per share for the hostile takeover. In contrast, Netflix proposed a structure of $23.25 in cash per share plus an exchange for Netflix stock valued at $4.50 per share.
David Ellison, Chairman of Paramount, stated that the “Ellison family” would guarantee the financing. However, the Warner Bros. board reportedly determined that it could not confirm Paramount’s financial capacity. FT reported, “The board argues that the certainty of the deal is low, given that the takeover bid is backed by the Ellison family trust.”
Concerns were further heightened by the withdrawal of private equity fund Affinity Partners, which had been expected to play the role of “white knight” in Paramount’s acquisition attempt. Affinity Partners is run by Jared Kushner, son-in-law of former President Donald Trump.
However, it has also been reported that Warner Bros. could reconsider a new proposal if Paramount addresses concerns about financing and raises its offer price.
Paramount’s bid to acquire the entire Warner Bros. business also worked against it. Netflix chose a “carve-out” approach, acquiring only the most profitable core entertainment assets, such as Warner Bros. Pictures, Warner Bros. Television, and HBO Max.
Meanwhile, under the agreement between Warner Bros. and Netflix, Warner Bros. is allowed to review offers from other bidders. If Warner Bros. receives a better offer, it must give Netflix the opportunity to match or improve its terms to maintain the existing agreement.
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