Why does Paramount Skydance need the Persian Gulf to finance its bid for Warner Bros. Discovery?
It’s a niggling question that hasn’t gone away for Paramount Skydance owners David and Larry Ellison, the son-and-father duo now scrambling to persuade shareholders of the company, known as WBD, to sell the media giant to them instead of Netflix.
As most of the investing world knows by now, the WBD board rebuffed the Ellisons’ all-cash $30-a-share bid to buy all of WBD, instead picking a $27.75-a-share offer from Netflix for the Warner Bros. studio and the HBO Max streaming app. Their plan is to separately sell WBD’s cable properties for an extra few dollars a share in a deal they claim is effectively worth $30.75 a share. The Ellisons are appealing to shareholders directly, going “hostile,” and arguing their bid is and was superior.
They’ve ripped the Netflix deal as risky not only from a regulatory standpoint (lots of potentially antitrust-laden overlap), but also in terms of how much it values those cable properties including CNN, saying the implied $3 a share looks optimistic.
Meanwhile, read the fine print of the Paramount Skydance bid, sources close to WBD counter: Larry Ellison — the Oracle co-founder whose net worth of $243 billion makes him the No. 3 richest person in the world — has relatively little skin in the game to finance son David’s proposal to buy the owner of Warner Bros., HBO and CNN for $78 billion in cash.
The Oracle co-founder is for now said to be ponying up just $12 billion — less than 5% of his fortune — to make the megadeal happen. Meanwhile, a trio of Middle Eastern sovereign wealth funds has pledged twice that amount — a disclosure that was sure to raise eyebrows about foreign interests controlling US media assets.
It’s also a thread that’s being tugged at by people close to wily WBD CEO David Zaslav, and Netflix CEO Ted Sarandos as they lobby investors for their $72 billion deal for the Warner Bros. studio and HBO Max streaming app and to ignore the hostile stuff coming from the Ellisons.
Sore losers
To hear it from WBD and Netflix, the Ellisons are sore losers who might not have the money they say they do. Most of Larry’s net worth is tied up in shares of Oracle, which have been getting crushed in recent weeks amid the AI market selloff.
Why else would they invite scrutiny by going to Saudi Arabia, Qatar and the UAE for dough?
The Ellisons have their own sharp elbows, arguing for example that the WBD board didn’t give their offer a full and fair hearing, the spun-out cable assets are worth no more than a buck a share, and that’s why they need to go hostile. Either way, the dueling narratives have turned a bidding war into a fat cat fight for the ages as some of the most powerful executives slug it out for control of one of the world’s great media properties.
As the battle raged, eyes focused last week on something called the Lawrence J. Ellison Revocable Trust, which is the repository of Larry’s fortune. In particular, WBD’s board said it favored Netflix because it was concerned about the “revocable” part and, reportedly, that Paramount Skydance wanted a $2.8 billion limit on damages should it bail out of the deal.
Plea to shareholders
In a letter to WBD shareholders, Paramount Skydance countered: “Any concern that the Trust would take any steps to avoid its obligations (i.e., commit fraud) is meritless and, if such a concern is ever directly raised with the Trust, we will happily address it in the paperwork.”
The Middle East money, they claim, is a positive, not a negative. They tout these as three of the world’s most sophisticated sovereign wealth funds. They also have debt financing from Bank of America and PE giant Apollo, and cash from a hedge fund run by President Trump’s son-in-law, Jared Kushner.
Famed media investor Mario Gabelli, a Paramount Skydance shareholder, is among those who have pledged their WBD shares to the Ellisons’ tender because he likes the cash part and really doesn’t care that it came from the likes of the Saudis.
Consider: The Ellisons’ initial bid was both cash and stock worth $19 a share. To entice Zas, the Ellisons and RedBird Capital went all cash at ever higher numbers and increased the cash portion to 100%.
The Middle East money came after Larry Ellison’s bank started taking a big hit; he’s lost more than $150 billion in paper wealth since the bidding war began.
To hear the Ellisons tell it, the Persian Gulf players are paying up for their vision of a merged company that will leverage some of the best media assets in the world.
On the other side, of course, there’s plenty of sneering about what these oil-rich kingdoms are really angling for — like influence over the US media whether they have voting shares or not.
Of course, investors don’t seem to mind all the mudslinging because shares of WBD are up 150% since the bidding war began.
