Paramount Skydance pitches case to WBD shareholders

Paramount Skydance chief exec David Ellison has made a personal and professional appeal to Warner Bros Discovery (WBD) shareholders, as part of an ongoing campaign that has already produced six bids over 12 weeks.

In a public letter, the missive distilled information from Paramount’s SEC (Securities And Exchange Commission) filing on Tuesday, which noted the $30 per share all-cash bid.

He said that the Ellison family and RedBird have collectively committed to backstop 100% of the $40.7bn of equity capital required for the transaction.

“Paramount began pursuing Warner Bros. Discovery (WBD) because we, along with our partner RedBird Capital, believe we are the best stewards not only to build long-term value for the asset but also delight audiences and help cultivate a more vibrant creative community,” Ellison wrote in Tuesday’s letter.

“We funded, founded and then merged Skydance with Paramount and know the sacrifices and investment it takes to capitalise and grow a media business. I am passionate and dedicated to this pursuit, committed to putting my own money in, and that is why I am writing to you today.”

The letter continued, in Ellison’s capital letters: “Our public offer – identical to the terms we presented to WBD privately [on December 4] – delivers superior value and a faster, more certain path to completion than the transaction announced with Netflix. IT IS NOT TOO LATE TO REALISE THE BENEFITS OF PARAMOUNT’S PROPOSAL IF YOU CHOOSE TO ACT NOW AND TENDER YOUR SHARES.”

Ellison argues that Paramount’s offer will deliver better value to WBD shareholders than the Netflix bid that was accepted by the David Zaslav-led company last week.

Paramount’s offer for the entire WBD values the company’s equity at $77.9bn rising to an enterprise value of $108.4bn including debt and non-controlling interest.

Netflix’s $27.75 offer per WBD share in cash and stock is for the company’s studios and streaming business only, and assigns an equity value of $72bn to WBD and an enterprise value of approximately $82.7bn.

The Paramount chief wrote that Netflix’s cash component is approximately $18bn lower than Paramount’s “in the aggregate” of roughly $7 per share.

Ellison also noted that Paramount’s financing was “air tight” and had a clearer path to regulatory approval, as opposed to Netflix, which he said faces “a long and bumpy ride” with a combined Netflix-HBO Max streaming business that would hold approximately 43% of market share, and a vertically-integrated business that would “give Netflix greater leverage over theatrical exhibitors and creative talent alike”.

The letter went on to say that Netflix’s regulatory path is “particularly challenged in Europe where its dominance is far more entrenched […]. The acquisition of WBD’s streaming & studios business is a blatant attempt to eliminate one of Netflix’s only viable international competitors in HBO Max”.