Warner Bros. urges shareholders not to take Paramount's hostile bid
by Lisa Hornung · UPIDec. 17 (UPI) -- Warner Bros. Discovery's board of directors urged shareholders on Wednesday to reject the hostile takeover by Paramount Skydance.
The board said in a press release that it preferred the merger deal it had reached with Netflix over Paramount's hostile bid amid a bidding war between the two companies.
"This offer once again fails to address key concerns that we have consistently communicated to Paramount throughout our extensive engagement and review of their six previous proposals," said Samuel A. Di Piazza Jr., chair of the Warner Bros. Discovery board of directors. "We are confident that our merger with Netflix represents superior, more certain value for our shareholders, and we look forward to delivering on the compelling benefits of our combination."
The board sent a letter to its shareholders on Wednesday telling them why it believed the Paramount deal is a bad choice in comparison to Netflix's bid, with an enterprise value of about $82.7 billion.
"Our agreement with Netflix gives WBD shareholders $23.25 in cash, plus $4.50 in shares of Netflix common stock (based on a collar range of $97.91-$119.67 in the Netflix stock price at the time of closing), plus the additional value of the shares of Discovery Global and the opportunity to participate in future potential upside following Discovery Global's separation from WBD. The entire Board is confident in our recommendation that Netflix represents the best value-creating path for shareholders," the letter said.
Paramount, on Dec. 8, launched the hostile bid offering $30 per share, all cash, to WBD shareholders, which it said would ultimately equal $18 billion more in cash than Netflix's offer.
The WBD board, however, cast doubt on the value of the deal in its letter to shareholders.
"PSKY has consistently misled WBD shareholders that its proposed transaction has a 'full backstop' from the Ellison family. It does not, and never has," the letter said.
"PSKY's most recent proposal includes a $40.65 billion equity commitment, for which there is no Ellison family commitment of any kind. Instead, they propose that you rely on an unknown and opaque revocable trust for the certainty of this crucial deal funding. Despite having been told repeatedly by WBD how important a full and unconditional financing commitment from the Ellison family was ... the Ellison family has chosen not to backstop the PSKY offer."
Di Piazza went on CNBC's Squawk Box Wednesday and said the board would have liked the participation of Ellison's father, Oracle co-founder Larry Ellison.
"We were not confident that one of the richest people in the world would be there at closing," Di Piazza said. "Doing a deal is great; closing a deal is better."
Di Piazza argued in favor of the Netflix deal to CNBC.
"Netflix made a compelling offer -- it was heavy in cash, certainty of close, a high termination fee, and they responded to the operating issues that we were concerned about," he said. "PSKY had every opportunity to deal with that broad range of issues, and they chose not to."
He noted that Netflix's bid had "no need for any equity financing and robust debt commitments."
"It was not a hard choice," Di Piazza said.
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