Paramount Skydance has no immediate plans to sweeten its $30-a-share, all-cash bid for Warner Bros. Discovery – instead continuing to make its case to shareholders that its $78 billion offer is superior to the company’s current deal with streaming giant Netflix, The Post has learned.
Paramount Skydance’s owners David and Larry Ellison and their partners at RedBird Capital are expected to immediately tell shareholders that they will commit to eventually covering the deal’s $2.8 billion breakup fee — or about $1 share — preserving their all cash bid if enough investors tender their shares in favor of the Paramount deal by its Jan. 8 deadline.
Many investors and even people inside Warner Bros. Discovery expected a bidding war to emerge after Paramount Skydance went “hostile” last week, appealing directly to WBD shareholders to reject the company’s decision to sell the Warner Bros. studio and HBO Max to Netflix for $27.75 a share.
Bidding war talk heated up Tuesday now that WBD is on the verge of formally calling on investors to reject Paramount Skydance’s hostile bid for the entire company. Sources say WBD is planning to make a formal filing possibly as early Wednesday arguing why shareholders should stay the course with Netflix; their argument will mainly center on the “lack of certainty” with the financing sources Paramount Skydance is relying on to upend the Netflix deal.
But sources close to Paramount Skydance and their investing partners at RedBird Capital say there is nothing uncertain about their financing.
The feeling inside Paramount Skydance is they “don’t have to do anything immediately, and (they) have to be disciplined based on the feedback from investors,” said one person with direct knowledge of the matter. “(They) have yet to be convinced that Netflix has a better offer and the feedback for the $30 all cash bid has been positive.”
This person pointed to recent comments by famed media investor Mario Gabelli, who has already said he will tender his WBD shares for Paramount’s all-cash bid instead of Netflix’s deal, which is tied up in stock, complex financing, and subject to lengthy regulatory delays. Gabelli has no problem with the company tapping the Persian Gulf for some of its equity, one of the moves cited by WBD for rejecting its offer.
“I want the money for my clients and I want it quicker,” Gabelli told On The Money.
Reps for WBD and Paramount Skydance had no immediate comment.
Paramount Skydance is arguing it lined up credit lines from Bank of America, Apollo, Larry Ellison, as of now, will chip in $12 billion in cash, and the Gulf State funds will contribute another $24 billion in equity. The sovereign funds are putting up the money without board seats or a say in managing the new company if Paramount Skydance should win, sources said.
Executives at Paramount Skydance also argued their deal’s regulatory certainty since Netflix would be combining those streaming assets, something that will likely touch off a lengthy DOJ antitrust investigation and uncertainty in the courts.
WBD and Netflix have countered that the regulatory fears are overdone because so many people rely on social media and YouTube as opposed to streaming for programming. They also have argued — and will argue again in the pending regulatory filing — that they have serious questions about how Paramount Skydance is cobbling together its $78 billion bid and it goes beyond the Gulf state money.
Larry Ellison, the third-richest man in the world with a net worth of $235 billion, has committed to fully backstop the deal with a massive fortune that consists mostly of shares of Oracle. But those shares have lost more than $160 billion in value since the bidding war began in September amid a steep correction in AI related stocks.
Moreover, he’s not personally backstopping the deal, they argue, but he’s pledging assets from his “revocable” trust. Paramount Skydance says the argument doesn’t hold water because the trust is where Ellison keeps his massive net worth and has been used as a vehicle for other dealmaking.
As The Post has reported, Paramount Skydance has held early stage internal discussions about increasing its bid for the company to around $30 a share as a way to wrest control of WBD from Netflix.
Netflix won the bidding for the the media conglomerate after a months-long slog where WBD chief David Zaslav shopped his company, that includes the No. 1 studio Warner Bros., and No. 3 streaming service known as HBO Max as well as cable properties like CNN and Discovery to a series of major tech and media players from Apple to Amazon to Comcast and its final two bidder Netflix and Paramount Skydance.
When WBD announced Netflix as the winner, Paramount Skydance, as The Post first reported, began taking steps to launch a hostile bid that appeals directly to shareholders. Its argument centered on the superior nature of its bid — all cash versus cash and stock from Netflix — and how the Netflix offer relies on the uncertainty of equity shareholders will receive from sale of a cable assets next year since its just buying the studio and streamer from WBD.
