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Payne Capital Management President Ryan Payne joins Mornings with Maria to discuss Warner Bros.’ rejection of the film. Discovery of Paramount’s hostile bid amid Netflix’s attempt to buy the media giant and more.
Warner Bros. Discovery announced Wednesday that its board of directors unanimously rejected Paramount’s takeover bid, saying it was not in the best interests of shareholders and Netflix is the preferred partner.
Netflix agreed last year to acquire Warner Bros.’ film and television studios and streaming platform. Discovery, HBO Max, in cash and stock deal valued at $27.75 per Warner Bros. share Paramount, a Skydance company, then launched a hostile takeover bid for all of Warner Bros. Discovery, including the cable assets Netflix left behind.
WBD Chairman Samuel A. Di Piazza Jr. reiterated the board’s recommendation in favor of the Netflix deal and recommended shareholders reject Paramount’s offer.
“The board unanimously determined that Paramount’s latest offer remains inferior to our merger agreement with Netflix in several key areas,” Di Piazza said.
SENATE PREPARES FOR “INTENSE” ANTITRUST HEARING FOLLOWING NETFLIX AND WARNER BROS DEAL
Warner Bros. Discovery announced Wednesday that its board of directors had unanimously rejected Paramount’s takeover offer. (Mario Tama/Getty Images/Getty Images)
“Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that creates closing risks and a lack of protection for our shareholders if a transaction is not completed,” Di Piazza continued. “Our binding agreement with Netflix will deliver superior value with higher levels of certainty, without the significant risks and costs that Paramount’s offer would impose on our shareholders.”
A letter detailing the board’s position was also sent to shareholders.
“PSKY’s offer is lower given the significant costs, risks and uncertainties relative to the Netflix merger. Under the terms of the Netflix merger agreement, WBD shareholders will receive a significant value of $23.25 in cash and shares of Netflix common stock representing a target value of $4.50 based on a range of Netflix’s stock price at the time of closing, which presents potential for future value creation,” the board wrote.
Paramount CEO David Ellison announced a hostile takeover bid for Warner Bros. on December 8. Discovery. (Charly Triballeau/AFP via Getty Images / Getty Images)
“The board also considered the costs and loss of value to WBD shareholders associated with accepting PSKY’s offer. WBD would be obligated to pay Netflix a termination fee of $2.8 billion for abandoning our existing merger agreement; to incur costs of $1.5 billion for failing to complete our debt exchange, which we could not execute under PSKY’s offer without PSKY’s consent; and to incur additional interest costs of approximately $350 million,” they continued. “The total cost to WBD would be approximately $4.7 billion, or $1.79 per share. These costs would in effect reduce the net regulatory termination fee that PSKY would pay to WBD from $5.8 billion to $1.1 billion if the PSKY transaction failed. By comparison, the Netflix transaction imposes none of these costs on WBD.”
The letter goes on to suggest that Paramount’s offer included an “extraordinary amount of debt financing” that increases “the risk of failed closing, particularly when compared to the certainty of the Netflix merger.”
“Your board has negotiated a merger with Netflix that maximizes value while mitigating downside risks, and we unanimously believe the Netflix merger is in your best interests. We are focused on advancing the merger with Netflix to deliver its compelling value to you,” the board wrote.
Paramount did not immediately respond to a request for comment.
