Warner Bros. Discovery Rejects David Ellison’s $24 a Share Bid
David Ellison, head of Paramount Skydance, recently had his $24 per share proposal for Warner Bros. Discovery (WBD), a massive deal valued at $57 billion, turned down. This development comes amid escalating discussions between the two media powerhouses.
Sources indicate that this is the third round of negotiations initiated by WBD’s CEO, David Zaslav, reaching out to major media and tech firms, with Ellison consistently facing rejection. Interestingly, prior reports hadn’t mentioned the failure of the $24 bid, though there had been hints that it was on the way. Apparently, WBD is anticipating yet another offer from Ellison shortly.
On Tuesday, WBD acknowledged it had gained “unsolicited interest” from potential buyers, which triggered a nearly 12% surge in stock prices. The stock traded at $20.44, reflecting a recent increase of $2.12.
Zaslav’s team has not commented on this matter, nor has a representative for Skydance. WBD has started to explore various strategic options following this unexpected interest, which includes full offers for the company as well as separate bids for its popular streaming service, HBO Max. Plans are in place to spin it off from cable assets in April.
This announcement seems to hint that Zaslav and his team believe Ellison is gearing up to make his intentions known, potentially escalating his offer to between $26 and $28 per share.
Hostile takeovers, where bidders appeal directly to shareholders instead of working through the company’s board, may be in play here. Zaslav and his team are using their public bid as leverage, thinking Ellison’s offer might undervalue WBD.
Zaslav values his assets, including a top studio and HBO’s premier cable channel, at more than $30 a share. This means he’d prefer to see Ellison pay over $70 billion for the company.
He successfully argued to the WBD board against three of Ellison’s offers, believing he could endure a bit longer for better funding. Some analysts suggest that the streaming and studio segments alone, expected to be separated from cable in May, may be worth around $30 a share.
Zaslav intends to keep declining offers until the price is more favorable, while also pursuing the option of breaking up the company or buying various segments himself. Recent reports indicate interest from heavyweights like Netflix, Amazon, Comcast, and even Apple in WBD’s studio and streaming operations. Microsoft is looking at segments of the enterprise as well.
This rejection marks another hurdle for Ellison, the son of tech billionaire Larry Ellison, since his acquisition of Paramount in August.
Ellison is reportedly getting financial backing from private equity firm Apollo, with Paramount Skydance collaborating with another firm, Redbird Capital. The financial landscape raises questions about how Larry Ellison might factor into efforts to fund an acquisition of this magnitude, which could dwarf the $6 billion David spent on Paramount, a mid-sized media company with challenging assets.
Some industry experts believe that Ellison’s hesitance to offload Oracle shares to pursue WBD has hampered his previous bids, which has given Zaslav the breathing room to push back against those offers.
