Warner Bros. Discovery’s board will review an offer from tech tycoon Larry Ellison to personally guarantee Paramount Skydance’s $78 billion hostile takeover bid – adding a fresh twist to a bidding war that has most recently favored Netflix, On The Money has learned.
Bankers involved in the decision say the board’s review is expected given the contentious – and potentially litigious – trajectory of the contest for the company known as WBD, which controls the famed Warner studio, HBO Max streaming service and cable properties such as CNN, Discovery and TNT.
Indeed, people at Paramount Skydance expect the board to ultimately ignore Larry Ellison’s personal guarantee on the deal spearheaded by his son, David Ellison, the company’s CEO. That’s after WBD cited his reliance on backstop money from his “revocable trust” as cause to reject their $30 a share all cash offer, according to a source close to the situation.
That’s why in addition to adding Ellison’s guarantee of his personal fortune — currently valued at above $250 billion — they also on Monday extended the deadline for investors to tender their shares to their side and away from Netflix to Jan. 21. The tender due date was previously slated for Jan. 8.
Last week, The Post reported that Paramount Skydance was considering raising its $30-a-share bid by as much as 10% in addition to covering the Netflix deal’s breakup fee, equal to about $1 a share. Sources, however, indicated that the company has no plans to raise its bid in the near term.
So far, only a tiny fraction of Paramount Skydance’s investors have sided with the father and son team – just 400,000 voted out of 2.6 billion shares.
A Paramount Skydance press official had no comment; Robert Gibbs, a press official for WBD, said the board will look at the new offer but declined further comment. In a statement late Monday, WBD’s board said it “will carefully review and consider Paramount Skydance’s offer in accordance with the terms of Warner Bros. Discovery’s agreement with Netflix” and will advise shareholders upon completing the review.
Gerry Cardinale of RedBird Capital has been spearheading Paramount Skydance’s efforts to woo investors. In addition to individual meetings with holders of WBD stock, he has been pushing the merits of the company’s offers in various media appearances including Monday morning on CNBC.
Cardinale has argued that the Netflix offer will face regulatory hurdles (lumping two big streaming services together) and that it, unlike Paramount Skydance’s all-cash bid, relies on a stock component that has been tumbling in value. The Netflix deal also leans heavily on the sale of WBD’s cable properties to push its overall value above Paramount Skydance’s $30-a-share offer.
Those cable properties will be sold to investors in a spin out deal that WBD believes will put their value at as much as $4 a share, for a combined $31.75 offer when you figure in Netflix’s $27.75 a share offer for the streaming and studio.
But when you figure in debt levels – the cable properties will include $18 billion in debt – sources say Cardinale argues it should trade for far less. He says WBD is valuing its cable spinoff at levels higher than Comcast’s spinoff of its cable properties, known as Versant, that don’t carry as much debt.
Some investors agree. Mario Gabelli, a longtime WBD shareholder, has called on Netflix Monday to revise and simplify its offer and has said he is likely to tender shares to Paramount.
WBD in a recent filing has accused Paramount Skydance, run by Larry Ellison’s son David Ellison of submitting an “illusory” bid for the company devoid of proper money guarantees for their $78 billion offer.
Paramount Skydance and its partners at RedBird Capital contend that WBD held a rigged bidding process that favored an inferior bid from Netflix because of a close, personal relationship between WBD chief David Zaslav and Netflix CEO Ted Sarandos.
