Paramount Intensifies Bid for Warner Bros. Discovery
NEW YORK — In a renewed effort, Paramount has enhanced its hostile takeover bid for Warner Bros. Discovery and has once again extended the deadline for its tender offer in hopes of attracting more shareholder support.
This Tuesday, the company, which is owned by Skydance, announced it would provide Warner shareholders with an additional “ticking fee” if the deal does not close by year-end. This fee totals 25 cents per share, translating to $650 million for each quarter post-December 31. Paramount has also committed to financing Warner’s planned $2.8 billion breakup payment to Netflix, as stipulated in their merger agreement.
While the financial terms of Paramount’s offer remain at $30 cash per share for Warner’s stakeholders, they now have until March 2 to tender their shares.
Paramount CEO David Ellison stated that the newly introduced benefits clearly highlight their ongoing commitment to delivering value to Warner’s shareholders.
Paramount’s goal is to acquire Warner for a total of $77.9 billion, which includes an enterprise value of $108 billion when accounting for debt. This valuation takes into consideration Warner’s whole operation, which comprises networks like CNN and Discovery.
However, Paramount faces significant hurdles in garnering shareholder support, as recent disclosures indicate a notable decrease in valid shares tendered. As of Monday, only 42.3 million shares from Warner had been “validly tendered and not withdrawn,” a decrease from over 168.5 million shares reported on January 21.
Currently, Warner Bros. Discovery has approximately 2.48 billion shares of series A common stock outstanding. Paramount needs to secure more than 50% of those shares to gain control.
This latest March 2 deadline marks the third extension for Paramount’s tender offer, which might face additional postponements. The company has also begun soliciting proxies to challenge Warner’s existing agreement with Netflix.
On Tuesday, Warner confirmed receipt of Paramount’s “amended, unsolicited tender offer,” stating that its board would review the proposal but reaffirmed its commitment to the Netflix deal as it stands. Netflix’s representatives did not respond immediately to media inquiries.
Warner’s leadership has consistently supported the intended merger with Netflix, which in December, agreed to purchase its studio and streaming operations for $72 billion. This all-cash deal is expected to expedite the shareholder vote anticipated by April. The enterprise value of this agreement is approximately $83 billion, equating to $27.75 per share.
Both Netflix and Warner maintain that their arrangement surpasses Paramount’s bid. Nevertheless, Paramount contends that its offer is more favorable and notes a “sliding scale” payout related to the Netflix merger, potentially ranging from $21.23 to $27.75 per share, influenced by Warner’s previously disclosed network spinoff.
Contrarily, Netflix is not interested in Warner’s networks. Under their agreement, “Discovery Global” is set to transition into its own separate public entity prior to finalizing the merger.
The possibility of a sale of Warner to either of the companies has raised significant antitrust concerns among lawmakers globally, prompting calls for regulators to conduct thorough reviews of such a merger. Already, the U.S. Department of Justice has begun examining both Warner’s agreement with Netflix and Paramount’s hostile bid. All three entities have reported ongoing communication with the DOJ regarding requests for information.
Other nations may also assess the deal. Notably, Paramount reported it obtained clearance for its tender offer from authorities in Germany last month.
While each company argues that their proposals would benefit consumers and the broader entertainment sector by expanding content availability, unions and trade associations warn that further consolidation could lead to job losses and reduced diversity in content, which could detrimentally impact filmmaking.
