Warner Bros. Discovery just told its investors for a second time to thumb their noses at Paramount's bid for the company. In a letter to shareholders released Wednesday, Warner's board urged investors to reject Paramount's revised hostile takeover bid, saying it still falls short of the company's existing $72 billion agreement with Netflix. The board called the Paramount offer neither better nor "even comparable" to Netflix's deal for Warner's film and TV studios and HBO Max.
Paramount had sweetened its $77.9 billion all-cash bid by adding a $40.4 billion personal equity guarantee from billionaire Larry Ellison and matching Netflix's $5.8 billion breakup fee if regulators block a deal. Warner's board unanimously said that wasn't enough, arguing the bid undervalues the company, carries serious financing and regulatory risk, and would effectively amount to a record-size leveraged buyout. Warner said walking away from Netflix would trigger billions in extra costs, including a $2.8 billion termination fee to Netflix and a $1.5 billion penalty tied to the fact that it would not be able to complete its debt exchange, reports the Wall Street Journal. The letter notes:
- Paramount "is a company with a $14 billion market capitalization attempting an acquisition requiring $94.65 billion of debt and equity financing, nearly seven times its total market capitalization. ... The transaction [it] is proposing is in effect a leveraged buyout ('LBO'). In fact, it would be the largest LBO in history," which "introduces risks given the acquiror's reliance on the ability and willingness of its lenders to provide funds at close. ... This aggressive transaction structure poses materially more risk for WBD and its shareholders when compared to the conventional structure of the Netflix merger."
Under the Netflix agreement, Warner shareholders get $27.75 per share in cash and stock for the studio and streaming assets, while retaining shares in a separate cable-focused company to be called Discovery Global. Paramount is offering $30 a share for all of Warner, including cable channels such as CNN, TBS, and Food Network. The New York Times notes the cable arm is "one likely point of contention ... [Paramount CEO] David Ellison has argued that the business would trade at $1 a share, bolstering his case that Paramount's acquisition of the full company is better for shareholders than Netflix's plan."
,
uBlock 
,
and
Ghostery 
)
