Warner Bros. Discovery Board Dismisses Paramount’s Acquisition Proposal
Payne Capital Management President Ryan Payne joins Mornings with Maria to discuss Warner Bros. Discovery’s rejection of Paramount’s hostile bid amid Netflix’s attempt to purchase the media giant and more.
On Wednesday, Warner Bros. Discovery (WBD) announced that its board unanimously rejected a tender offer from Paramount, asserting that it was not in the best interest of shareholders. The board emphasized that Netflix is their preferred partner.
Last year, Netflix agreed to acquire Warner Bros. Discovery’s film and television studios, along with its streaming platform, HBO Max, in a cash-and-stock deal valued at $27.75 per share. Following this, Paramount, a subsidiary of Skydance Corporation, initiated a hostile takeover bid for all of Warner Bros. Discovery, including cable assets that Netflix chose to leave behind.
Samuel A. Di Piazza, Jr., chair of the WBD Board of Directors, reiterated the board’s recommendation to support the Netflix deal and urged shareholders to reject Paramount’s offer. “The Board unanimously determined that Paramount’s latest offer remains inferior to our merger agreement with Netflix across multiple key areas,” Di Piazza stated.
SENATE GEARS UP FOR ‘INTENSE’ ANTITRUST HEARING IN WAKE OF NETFLIX, WARNER BROS DEAL
Warner Bros. Discovery announced on Wednesday that its board unanimously rejected Paramount’s tender offer. (Mario Tama/Getty Images / Getty Images)
Di Piazza elaborated, stating, “Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for our shareholders if a transaction is not completed.” He emphasized that the binding agreement with Netflix offers superior value with greater certainty, free from the significant risks and costs associated with Paramount’s proposal.
A letter outlining the board’s position was also sent to shareholders. The board noted, “PSKY’s offer is inferior given significant costs, risks, and uncertainties as compared to the Netflix merger.” Under the Netflix agreement, WBD shareholders are set to receive $23.25 in cash and shares of Netflix common stock, representing a target value of $4.50 based on the stock price at the time of closing, which has potential for future value creation.
Paramount CEO David Ellison announced a hostile takeover bid of Warner Bros. Discovery on Dec. 8. (Charly Triballeau/AFP via Getty Images / Getty Images)
The board also assessed the financial implications for WBD shareholders if they accepted the PSKY offer. They would incur a $2.8 billion termination fee to Netflix for abandoning the merger agreement, along with a $1.5 billion fee for failing to complete a debt exchange, which would require PSKY’s consent. Additionally, they would face an incremental interest expense of approximately $350 million. In total, these costs would amount to around $4.7 billion, or $1.79 per share, significantly reducing the net amount of the regulatory termination fee from $5.8 billion to $1.1 billion in the event of a failed transaction with PSKY. In contrast, the Netflix deal imposes none of these costs on WBD.
The letter further criticized Paramount’s offer for its “extraordinary amount of debt financing,” which increases the risk of failure to close, especially when compared to the certainty provided by the Netflix merger.
“Your Board negotiated a merger with Netflix that maximizes value while mitigating downside risks, and we unanimously believe the Netflix merger is in your best interest. We are focused on advancing the Netflix merger to deliver its compelling value to you,” the board concluded.
As of now, Paramount has not responded to requests for comment.
Payne Capital Management President Ryan Payne joins Mornings with Maria to discuss Warner Bros. Discovery’s rejection of Paramount’s hostile bid amid Netflix’s attempt to purchase the media giant and more.
On Wednesday, Warner Bros. Discovery (WBD) announced that its board unanimously rejected a tender offer from Paramount, asserting that it was not in the best interest of shareholders. The board emphasized that Netflix is their preferred partner.
Last year, Netflix agreed to acquire Warner Bros. Discovery’s film and television studios, along with its streaming platform, HBO Max, in a cash-and-stock deal valued at $27.75 per share. Following this, Paramount, a subsidiary of Skydance Corporation, initiated a hostile takeover bid for all of Warner Bros. Discovery, including cable assets that Netflix chose to leave behind.
Samuel A. Di Piazza, Jr., chair of the WBD Board of Directors, reiterated the board’s recommendation to support the Netflix deal and urged shareholders to reject Paramount’s offer. “The Board unanimously determined that Paramount’s latest offer remains inferior to our merger agreement with Netflix across multiple key areas,” Di Piazza stated.
SENATE GEARS UP FOR ‘INTENSE’ ANTITRUST HEARING IN WAKE OF NETFLIX, WARNER BROS DEAL
Warner Bros. Discovery announced on Wednesday that its board unanimously rejected Paramount’s tender offer. (Mario Tama/Getty Images / Getty Images)
Di Piazza elaborated, stating, “Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for our shareholders if a transaction is not completed.” He emphasized that the binding agreement with Netflix offers superior value with greater certainty, free from the significant risks and costs associated with Paramount’s proposal.
A letter outlining the board’s position was also sent to shareholders. The board noted, “PSKY’s offer is inferior given significant costs, risks, and uncertainties as compared to the Netflix merger.” Under the Netflix agreement, WBD shareholders are set to receive $23.25 in cash and shares of Netflix common stock, representing a target value of $4.50 based on the stock price at the time of closing, which has potential for future value creation.
Paramount CEO David Ellison announced a hostile takeover bid of Warner Bros. Discovery on Dec. 8. (Charly Triballeau/AFP via Getty Images / Getty Images)
The board also assessed the financial implications for WBD shareholders if they accepted the PSKY offer. They would incur a $2.8 billion termination fee to Netflix for abandoning the merger agreement, along with a $1.5 billion fee for failing to complete a debt exchange, which would require PSKY’s consent. Additionally, they would face an incremental interest expense of approximately $350 million. In total, these costs would amount to around $4.7 billion, or $1.79 per share, significantly reducing the net amount of the regulatory termination fee from $5.8 billion to $1.1 billion in the event of a failed transaction with PSKY. In contrast, the Netflix deal imposes none of these costs on WBD.
The letter further criticized Paramount’s offer for its “extraordinary amount of debt financing,” which increases the risk of failure to close, especially when compared to the certainty provided by the Netflix merger.
“Your Board negotiated a merger with Netflix that maximizes value while mitigating downside risks, and we unanimously believe the Netflix merger is in your best interest. We are focused on advancing the Netflix merger to deliver its compelling value to you,” the board concluded.
As of now, Paramount has not responded to requests for comment.
