Hostile WBD bid to unseat Netflix: What to expect

paramount skydance I made a plan to persuade him on Monday. warner bros discovery We believe that shareholders are better buyers for the company. Netflix. Adversarial bidding could start a tug-of-war and complicate it.

Paramount has officially launched a tender offer for the current WBD stock at $30 per share, all in cash. The bid is backed by $41 billion in equity financing. The remaining funding will come from RedBird Capital and Jared Kushner’s Affinity Partners. Paramount also owes $54 billion from Bank of America, Citi, and Apollo Global Management.

Paramount’s tender offer period will be 20 business days, Andy Gordon, Paramount’s chief strategy officer, said on a conference call with investors on Monday. Warner Bros. Discovery has a 10-day deadline to respond, Gordon said, and after 20 business days, Paramount has the option to extend the deadline to continue making an offer to WBD shareholders.

During this period, any WBD shareholder can sell their shares to Paramount for $30. If Paramount acquires 51% of the company’s outstanding shares, it will take control of the company.

“We remain confident that (Paramount’s) offer should garner meaningful traction,” Raymond James equity analyst Rick Prentice said in a note to clients. “That being said, we believe Netflix is ​​fully committed to this deal. If (Paramount) seems to be gaining traction, we wouldn’t be surprised to see a response.”

That response could come in the form of an increase in Netflix’s offer, something Netflix co-CEO Ted Sarandos didn’t say much about in his speech at the UBS Global Media and Communications Conference on Monday.

If the battle drags on, it could ultimately lead to lawsuits and proxy fights that require all shareholders to vote.

The WBD board said in a statement Monday that it “does not intend to change its recommendation regarding the agreement with Netflix.” It advised shareholders “not to take any action regarding the Paramount Skydance proposal at this time.”

Still, the board “will carefully consider and consider Paramount Skydance’s proposal in accordance with the terms of its agreements with Warner Bros. Discovery and Netflix,” the board said in a statement.

If WBD shareholders appear convinced that Paramount’s bid is superior, Warner Bros. Discovery management could resume friendly talks with Paramount to ensure they get the best possible deal.

Paramount CEO David Ellison told CNBC’s David Faber on Monday that the company’s $30-per-share offer was not the “best and final,” suggesting Paramount was willing to pay more for WBD if negotiations resumed.

Ellison hopes to convince WBD shareholders that an all-cash offer of $30 per share is better value than Netflix’s $27.75 per share cash and stock offer for WBD’s streaming and studio assets.

Ellison told CNBC on Monday that he values ​​the linear cable network, which is not included in Netflix’s bid, at just $1 a share. WBD internally values ​​the business at about $3 per share, CNBC previously reported.

If WBD reaches an agreement with Paramount, WBD will pay Netflix $2.8 billion in penalties. That means Paramount may have to raise its bid or agree to pay the fee to accommodate the additional costs.

Ellison said Monday that Paramount’s odds of regulatory approval, combined with what he views as a higher bid, should make shareholders think the WBD board made a mistake in choosing Netflix’s offer.

Ellison said the combination of Netflix and HBO Max would create a “massive scale” streamer that would be bad for Hollywood and bad for consumers, and would be “anti-competitive in basically every way.”

Sarandos disagreed.

“We’re very confident that we can cross the line and finish,” Sarandos said at a UBS conference on Monday.

Sarandos also blasted Paramount’s estimate of $6 billion in synergies, noting that potential cost savings would likely mean job losses.

“We’re not cutting jobs, we’re creating jobs,” Sarandos said.