Paramount’s anti-WBD attempt to take down Netflix: What to expect

Paramount Skydance She made her plan on Monday to convince her Warner Bros. Discovery shareholders that he is a better buyer for the company than him Netflix. A hostile offer begins a tug of war that can get complicated.

Paramount has officially launched an offer to purchase existing WBD shares at $30 per share, all in cash. The offering is backed by $41 billion in equity financing. The rest will be money from RedBird Capital and Jared Kushner’s Affinity Partners. Paramount also has $54 billion in debt commitments from Bank of America, Citi and Apollo Global Management.

Paramount’s tender offer will be open for 20 business days, Andy Gordon, Paramount’s chief strategy officer, said during an investor conference call on Monday. Gordon said that Warner Bros. Discovery has 10 days to respond, and after the 20 business day period expires, Paramount has the option to extend the deadline to keep the offer open to WBD shareholders.

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

“We believe [Paramount] “The offer should have significant traction,” Raymond James equity analyst Rick Prentice wrote in a note to clients. “However, we believe Netflix is ​​committed to this deal; if [Paramount] “It seems to be gaining momentum, we wouldn’t be surprised to see a reaction.”

That reaction could come in the form of an increase in Netflix exposure, as Netflix co-CEO Ted Sarandos didn’t say much when he spoke Monday at the UBS Global Media and Communications Conference.

A protracted battle may eventually lead to lawsuits or proxy fights that require full shareholder votes.

WBD’s board of directors said in a statement on Monday that it “does not amend its recommendation regarding the agreement with Netflix.” It advised shareholders “not to take any action at this time with respect to the Paramount Skydance proposal.”

However, the board said in its statement that 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.”

If WBD shareholders appear to be convinced that Paramount’s offer is the better one, Warner Bros. management could decide to move on. Discovery has resumed 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-a-share offer wasn’t the “below and end,” suggesting Paramount is open to paying more for WBD if discussions start up again.

Ellison hopes to convince WBD shareholders that an all-cash offer of $30 per share is more valuable than Netflix’s cash-and-stock offer of $27.75 per share for WBD’s broadcast and studio assets.

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

If WBD reaches an agreement with Paramount, WBD will owe Netflix $2.8 billion in breakup fees — meaning Paramount may have to increase its offer, or agree to pay the fees, to offset the added cost.

Ellison said Monday that Paramount’s prospects for regulatory approval, coupled with what he views as a higher bid, should sway shareholders that WBD’s board made a mistake in selecting Netflix’s bid.

Combining Netflix and HBO max would create streaming “at scale that would be bad for Hollywood and bad for the consumer,” Ellison said, noting that it would be “anticompetitive in basically every way you look at it.”

Sarandos disagreed.

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

Sarandos also criticized Paramount’s estimate of $6 billion in synergies, noting that these potential cost cuts would likely mean job losses.

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