Paramount’s Hostile Bid to WBD to Topple Netflix: What to Expect

Paramount Skydance presented his plan on Monday to convince Discovery of Warner Bros. shareholders that it is a better buyer for the company than Netflix. This hostile offer kicks off a standoff that could get complicated.

Paramount has officially launched an all-cash tender offer for current WBD stock at $30 per share. This offering is supported by $41 billion in equity financing. The rest will come from money from RedBird Capital and Jared Kushner’s Affinity Partners. Paramount also has $54 billion in debt commitments with Bank of America, Citi and Apollo Global Management.

Paramount’s tender offer will be open for 20 business days, Paramount Chief Strategy Officer Andy Gordon said Monday during an investor conference call. Warner Bros. Discovery has 10 days to respond, and once the 20 business days are up, Paramount has the option to extend the deadline to keep the offer open to WBD shareholders, Gordon said.

During this period, any WBD shareholder can sell their shares to Paramount for $30. If Paramount buys 51% of the outstanding shares, it would control the company.

“We believe that [Paramount] “The offering is expected to generate significant interest,” Ric Prentiss, an equity analyst at Raymond James, wrote in a note to clients. “That said, we believe Netflix is ​​committed to this deal; if [Paramount] seems to be gaining traction, we wouldn’t be surprised to see a reaction.”

That backlash could come in the form of increased offerings from Netflix, Netflix co-CEO Ted Sarandos said Monday at the UBS Global Media and Communications Conference.

A protracted battle could eventually result in lawsuits or proxy fights that would require a vote by all shareholders.

WBD’s board of directors said in a statement Monday that it was “not changing its recommendation regarding the Netflix deal.” He advised shareholders “not to take any action at this time regarding the Paramount Skydance proposal.”

Nonetheless, the board “will carefully review and consider Paramount Skydance’s offer in accordance with the terms of Warner Bros. Discovery’s agreement with Netflix, Inc.,” the board said in its statement.

If WBD shareholders seem convinced that Paramount’s offer is superior, Warner Bros. management. Discovery could resume friendly discussions with Paramount to ensure it gets the best deal possible.

Paramount CEO David Ellison told CNBC’s David Faber on Monday that the company’s $30 per share offer was not the “best and final,” suggesting that Paramount was willing to pay more for WBD if talks resumed.

Ellison hopes to convince WBD shareholders that a $30 per share cash offer is more valuable than Netflix’s $27.75 per share, cash and stock offer for WBD’s streaming and studio assets.

Ellison told CNBC on Monday that he values ​​the linear cable networks, which are not part of Netflix’s offering, at just $1 per share. WBD has internally valued this business at around $3 per share, CNBC previously reported.

If WBD reaches a deal with Paramount, WBD will owe Netflix $2.8 billion as a breakup fee, meaning Paramount may have to increase its offer, or agree to pay the fee, to adjust for the additional cost.

Ellison said Monday that Paramount’s chances of winning regulatory approval, combined with what he sees as a higher offer, should convince shareholders that WBD’s board made a mistake in choosing Netflix’s offer.

A Netflix-HBO max combination would create a streamer “on such a scale that it would be bad for Hollywood and bad for the consumer,” Ellison said, emphasizing that it would be “anti-competitive in every fundamental way.”

Sarandos disagreed.

“We are confident that we will cross the finish line and finish,” Sarandos said Monday at the UBS conference.

Sarandos also advanced Paramount’s estimate of $6 billion in synergies, noting that these potential cost reductions would likely result in job losses.

“We’re not killing jobs, we’re creating them,” Sarandos said.