It seems the game of “wait and see” will continue with regards to Paramount’s takeover bid of Warner Bros. Discovery.
WBD reportedly plans to reject Paramount’s latest offer, an amended $30 per share all-cash deal, according to Bloomberg’s Lucas Shaw. The latest in a string of offers from Paramount includes assurances from billionaire Oracle founder Larry Ellison, father of Paramount CEO David Ellison, to personally guarantee $40.4 billion in equity financing to close the deal. In a SEC filing earlier this month, WBD expressed concern over the financial backing of Paramount’s initial $30 per share offer, which the newest offer aimed to address.
Still, Paramount has not yet raised its bid from the $30 price despite suggestion that it is not a “best and final offer.”
Earlier this month, the WBD board announced a deal to sell its studio and streaming assets to Netflix for a share price of $27.75, while continuing a planned split of its cable assets, including TNT Sports, into a company called Discovery Global. Paramount’s offer is for the whole company.
The argument from Paramount and the Ellisons is that its $30 per share offer is worth more than the $27.75 from Netflix, plus the future share price of Discovery Global. Paramount says the Discovery Global assets will be worth $1 per share, while Netflix and the WBD board estimate the company to be priced between $3 and $4 per share, which would exceed Paramount’ $30 offer in the aggregate.
Should the WBD board reject Paramount’s offer next week, as the Bloomberg report indicates, the ball will be back in Paramount’s court to sweeten its deal. Per Bloomberg, several shareholders expect Paramount to come forward with a stronger offer.
If Paramount raised its offer by a few dollars per share, therefore exceeding even the loftier projections for Discovery Global, the WBD board would be compelled to seriously consider the new offer. And given that investors have punished Netflix for its current deal, with the streamer’s stock price tanking by more than 10% since the announcement, the chances of Netflix putting in an even better offer to match Paramount are considerably lower.
If a higher offer from Paramount was ultimately accepted, WBD would owe Netflix a $2.8 billion breakup fee for reneging on its deal.
About Drew Lerner
Drew Lerner is a staff writer for Awful Announcing and an aspiring cable subscriber. He previously covered sports media for Sports Media Watch. Future beat writer for the Oasis reunion tour.