Paramount Skydance makes hostile bid for WBD

David Ellison’s Paramount Skydance has launched an audacious bid to acquire Warner Bros Discovery, just days after Netflix agreed a deal to buy the US studio’s streaming and studio assets.

Paramount has made an all-cash $30-a-share offer for the entirety of WBD including the Global Networks segment, compared with Netflix’s $27.75 offer - made up of cash and shares - for its HBO Max and studio division.

Ellison’s company described its offer as “strategically and financially compelling” for WBD shareholders.

It added that its offer provides “a superior alternative to the Netflix transaction, which offers inferior and uncertain value and exposes WBD shareholders to a protracted multi-jurisdictional regulatory clearance process with an uncertain outcome along with a complex and volatile mix of equity and cash.”

The move comes after Friday’s announcement that Netflix had struck an agreement in principle with WBD on an $83bn deal for the streaming and studio assets of WBD, but Paramount said its offer would provide shareholders with an additional $18bn in cash, with its bid equating to an enterprise value of $108.4bn.

The David Ellison-led company, which has already had at least three formal bids for WBD knocked back, said WBD’s board of directors recommendation for the Netflix bid was “based on an illusory prospective valuation of Global Networks that is unsupported by the business fundamentals and encumbered by high levels of financial leverage assigned to the entity.”

Ellison, chairman and chief exec of Paramount Skydance, added: “WBD shareholders deserve an opportunity to consider our superior all-cash offer for their shares in the entire company.

“Our public offer, which is on the same terms we provided to the Warner Bros. Discovery board of directors in private, provides superior value, and a more certain and quicker path to completion.

“We believe the WBD Board of Directors is pursuing an inferior proposal which exposes shareholders to a mix of cash and stock, an uncertain future trading value of the Global Networks linear cable business and a challenging regulatory approval process.

“We are taking our offer directly to shareholders to give them the opportunity to act in their own best interests and maximize the value of their shares.”

Paramount Skydance said it was “highly confident” that its deal would secure “expeditious regulatory clearance”, adding that it “enhances competition and is pro-consumer, while creating a strong champion for creative talent and consumer choice.”

European competition

The Top Gun and Yellowstone outfit claimed that the Netflix deal “is predicated on the unrealistic assumption that its anti-competitive combination with WBD… could withstand multiple protracted regulatory challenges across the world.”

The company pointed to European Union countries, in which it said the Netflix transaction “would combine the dominant SVOD player with the number two or strong number three competitor.”

Paramount Skydance said the Netflix transaction would “create a clear risk of higher prices for consumers, lower pay for content creators and talent and the destruction of American and international theatrical exhibitors.

“Netflix has never undertaken large-scale acquisitions, resulting in increased execution risk which WBD shareholders would have to endure,” the company continued.

Paramount Skydance also accused WBD of not engaging in M&A discussions adequately.

“Despite Paramount submitting six proposals over the course of 12 weeks, WBD never engaged meaningfully with these proposals which we believe deliver the best outcome for WBD shareholders.

“Paramount has now taken its offer directly to WBD shareholders and its board of directors to ensure they have the opportunity to pursue this clearly superior alternative.”

Ellison continued: “We believe our offer will create a stronger Hollywood. It is in the best interests of the creative community, consumers and the movie theater industry.

“We believe they will benefit from the enhanced competition, higher content spend and theatrical release output, and a greater number of movies in theaters as a result of our proposed transaction.

“We look forward to working to expeditiously deliver this opportunity so that all stakeholders can begin to capitalize on the benefits of the combined company.”