Warner Bros Discovery Rejects Paramount’s Hostile Takeover Bid
Warner Bros Discovery’s board has firmly turned down a $108.4 billion hostile takeover proposal from Paramount Skydance, following concerns over financing and allegations of misinformation to shareholders. This decision comes shortly after Affinity Partners, a fund linked to Jared Kushner, withdrew from the deal, adding another layer to an already complex situation.
Details of the Bid Rejection
In a letter addressed to shareholders, Warner Bros Discovery accused Paramount of consistently misleading them regarding the financing behind its $30-per-share cash offer, suggesting it was fully backed by the Ellison family, led by billionaire Larry Ellison. The Warner Bros board emphasized that this assertion is inaccurate and highlighted the numerous risks associated with the offer.
Comparing Offers
The board of Warner Bros described Paramount’s proposal as “inferior” to Netflix’s binding agreement to purchase shares at $27.75 each. Unlike Paramount’s offer, Netflix’s agreement requires no equity financing and includes solid debt commitments, creating a more secure proposal. Furthermore, Warner Bros noted that Paramount’s offer could be altered or terminated at any time before finalization, unlike the binding merger agreement with Netflix.
Upcoming Shareholder Vote
While a date for the shareholder vote hasn’t been announced yet, it is anticipated to take place in the spring or early summer, according to Warner Bros’ chairman, Samuel Di Piazza.
Reactions from Paramount and Netflix
Amidst the ongoing negotiations, Paramount attempted to rally Warner Bros shareholders by asserting it had secured “air-tight financing” for its bid. It claimed to have $41 billion in new equity guaranteed by the Ellison family and RedBird Capital, along with $54 billion in debt commitments from major financial institutions.
Affinity Partners Pulls Out
The board’s decision coincided with Affinity Partners, a financial backer of Paramount, opting out of the deal. Although the firm didn’t disclose its contribution to Paramount’s offer, it acknowledged a change in the investment dynamics since its initial involvement.
Concerns Over Financing
Warner Bros raised serious doubts about the reliability of Paramount’s financing, particularly questioning the backing provided by an obscure Lawrence J Ellison Revocable Trust. They stated that this trust’s assets and liabilities are not publicly available and could fluctuate over time, making it a less reliable source of funding.
Market Reactions
Following the announcement, Paramount’s stock price dropped by 3.8%, while Warner Bros Discovery saw a minor decrease of 0.4%. In contrast, Netflix’s stock rose by 2.8%, reflecting investor confidence in the stability of its merger agreement.
Conclusion
As the competition between Paramount and Netflix heats up to control Warner Bros and its valuable assets, the rejection of Paramount’s hostile takeover bid highlights significant concerns over financing and commitment. The unfolding scenario promises to shape the future of streaming and film production in the industry.
- Warner Bros Discovery has rejected a $108.4 billion takeover bid from Paramount Skydance.
- The board cited misleading claims regarding the financing behind Paramount’s offer.
- Netflix’s offer was deemed more secure and binding compared to Paramount’s proposal.
- Market reactions reflect a significant drop in Paramount’s stock following the news.