Paramount Skydance’s Bid for Warner Bros. Discovery: A Gulf Financing Dilemma

There’s a lot at stake for David and Larry Ellison, the minds behind Paramount Skydance. They’re now working hard to convince Warner Bros. Discovery (WBD) shareholders to favor their offer over Netflix’s.

Recently, WBD’s board turned down the Ellisons’ offer of $30 per share, which was an all-cash bid. Instead, they chose Netflix’s offer, which is pegged at $27.75 per share for both the Warner Bros. studio and the HBO Max streaming service. The plan from WBD involves selling off cable assets separately, which they claim increases the total value to about $30.75 per share. In response, the Ellisons have taken a more confrontational approach, appealing directly to shareholders and maintaining that their proposal is superior.

They have labeled the Netflix deal as inherently risky—not just because of potential regulatory issues, as there are overlaps that might raise antitrust concerns, but also due to the perceived overvaluation of its cable assets, including CNN. They find the implied valuation of an additional $3 per share a bit too optimistic.

But take a closer look at the financial backing for Paramount Skydance. Reports suggest that Larry Ellison, with a staggering net worth of $243 billion, has only managed to pull together around $12 billion so far for this ambitious $78 billion bid for WBD, which includes Warner Bros., HBO, and CNN. In contrast, some Middle East sovereign wealth funds have committed twice that amount—raising eyebrows about foreign involvement in U.S. media.

This situation is not lost on WBD’s CEO David Zaslav and Netflix’s Ted Sarandos, who are actively encouraging investors to dismiss the Ellison family’s more aggressive tactics as they pursue their own deal with WBD, valued at $72 billion for HBO Max.

Competitive Spirit

WBD and Netflix seem to be suggesting that the Ellison family might be a bit overconfident or, perhaps, a tad less liquid than they present themselves to be. Much of Larry’s wealth is tied to Oracle, which has recently experienced a decline in share price amid a cooling AI market.

This raises a question—why the rush to secure funding from Saudi Arabia, Qatar, and the UAE? It’s a strategic move that also invites scrutiny.

As the bidding process unfolds, recent focus has shifted to Larry’s estate, under the Lawrence J. Ellison Revocable Trust. WBD’s board has expressed support for Netflix, primarily due to worries about the “cancellability” aspect of the deal and a reported desire to cap damages at $2.8 billion if Paramount Skydance pulls out.

Shareholder Engagement

In a letter to WBD shareholders, Paramount Skydance responded that any suspicions regarding the trust’s capabilities or intentions are unfounded. They are willing to address any concerns in a formal capacity.

The Ellisons argue that investment from the Middle East is beneficial, highlighting the sophistication of the involved sovereign wealth funds. Additionally, they’ve received financial backing from Bank of America, private equity firm Apollo, and even funds associated with Jared Kushner, Trump’s son-in-law.

Among the investors, Mario Gabelli, a notable media investor and shareholder in Paramount Skydance, has publicly pledged his WBD stock to their bid, emphasizing his focus on the cash aspect and a lack of concern regarding its origins.

The Movement’s Momentum

Initially, the Ellison family’s bid was valued at $19 per share, involving both cash and stock. To entice Zaslav, they and Redbird Capital adjusted the offer, boosting the cash component to a full 100%.

Meanwhile, Larry Ellison has seen more than $150 billion in paper wealth evaporate since the bidding war began. For the Ellisons, it’s about securing financing from the Gulf, which they believe is a key part of achieving a vision of merging top-tier media assets.

Of course, skepticism lingers regarding what these oil-rich investors truly want, particularly concerning potential influence over American media. Still, despite the drama—and perhaps because of it—WBD’s stock has surged by 150% since the war for control began.