Paramount restates $30 per share offer, claims WBD’s linear networks spin-off worth zero
Paramount has reaffirmed its offer to buy Warner Bros Discovery (WBD) for US$30 per share after WBD’s board on Wednesday recommended that its shareholders reject Paramount’s hostile takeover bid.
In a statement, the David Ellison-led company said it “notes” WBD’s “decision not to engage” with the offer, and reiterated that it believes it has addressed “every issue raised” by WBD’s board, including the addition of an irrevocable personal guarantee from Larry Ellison.
Paramount has repeatedly stated that its US$30 per share offer for all of WBD is superior to Netflix’s US$27.75 per-share deal for WBD’s studio and streaming assets. Under the Netflix arrangement, WBD’s global linear networks will be spun off into a new publicly traded company, Discovery Global.
After Netflix signed its US$82.7bn definitive agreement with Warner Bros in early December, Paramount took its US$30 per share offer – the equivalent of US$108.4bn – directly to WBD shareholders, giving them a deadline of January 21 to tender their shares.
“Paramount’s offer is superior to WBD’s existing agreement with Netflix and represents the best path forward for WBD shareholders,” said Paramount. “$30 per share in cash is easy to value. Netflix’s transaction, on the other hand, contains multiple uncertain components and has already decreased in total value.”
One of Paramount’s key arguments is that its deal is superior because of the value of the pending Discovery Global entity. According to Paramount’s analysis, the value of Discovery Global will be US$0 per share, due to the large amount of debt it will carry, plus other costs.
Comcast’s spin-off company Versant, which started trading on the Nasdaq this week, provides a point of comparison. Versant stock is down 25% since it officially launched on Monday, which Paramount claims “illustrates the challenged path ahead for Discovery Global.”
Coupled with the fact that Netflix’s share price has fallen since the deal with WBD was first announced, Paramount claimed that the “total value of the Netflix transaction to WBD shareholders today is $27.42 – unmistakably inferior to Paramount’s $30 in cash.”
Paramount’s decision to restate its initial proposal of US$30 per share comes after WBD’s board chair Samuel A Di Piazza Jr seemed to invite an improved offer during an interview on CNBC’s Squawk Box.
Speaking to CNBC’s David Faber, Di Piazzi Jr on Wednesday restated the board’s rationale for recommending that shareholders reject Paramount’s amended offer. But he also suggested that WBD is open to engaging with Paramount if they “put something on the table that is compelling and is superior.” Elsewhere, he denied WBD was fundamentally opposed to engaging with Paramount, saying the board would be “very open to do a transaction” with the company if certain key issues were addressed.
For its part, Netflix on Wednesday said it was forging ahead with its definitive agreement and was “engaging” with the US Department of Justice and the European Commission, which will both be reviewing the deal on antitrust grounds.
