Paramount escalated its hostile pursuit to acquire Warner Bros. Discovery, announcing Monday that Larry Ellison will personally guarantee the tens of billions he is contributing toward the transaction’s funding. The Ellisons will also permit shareholders sight into the family trust’s finances.
Warner Bros.’ board has repeatedly rejected Paramount’s bid, favoring instead an offer from Netflix, which WBD believes is more lucrative. The board also claimed Paramount misrepresented itself to WBD shareholders, questioning the legitimacy of the “illusory” funding proposed in the deal.
To counter this criticism, Paramount stated that Oracle founder Larry Ellison—father of Paramount CEO David Ellison—will backstop all $40.4 billion in equity capital he is putting toward the $78 billion deal financing. It is a substantial pledge, holding Larry Ellison accountable for roughly a sixth of his $250 billion fortune were things to go awry.
Larry Ellison also agreed not to withdraw the family trust, which could complicate potential deal funding, and Paramount is releasing paperwork confirming the trust holds 1.16 billion Oracle shares, which WBD’s board had called into question.
Paramount also increased the split fee to $5.8 billion from $5 billion, matching the payout Netflix promised WBD shareholders should the deal fall through.
One aspect of Paramount’s offer that remained unchanged: its overall valuation.
Paramount was offering WBD $30 per share, including CNN and the residual cable networks. Netflix proposed $27.75 per share for Warner Bros. and HBO. But Netflix and WBD contend that plans to spin off the cable assets will boost those stations’ total worth and ultimately yield the firm greater value than the Paramount transaction.
WBD’s board is expected to respond to Paramount’s revised offer. As the modifications address some, but not all, of WBD’s worries, it is uncertain if the board will shift its position.
But shareholders also hold a voice, and the hostile nature of Paramount’s proposal means WBD stock owners could disregard the board’s recommendation.
Paramount’s offer is significantly bankrolled by Saudi Arabian, Qatari, and Abu Dhabi royal families, and WBD’s board voiced concern over why Larry Ellison, one of the world’s wealthiest men, requires such assistance to finance the acquisition.
Paramount asserted that it has “unshakeable funding,” and David Ellison publicly labeled WBD “absurd” for doubting whether the transaction’s backers are genuinely worth the money.
WBD shares (WBD) climbed 4% on Monday. Paramount shares (PSKY) rose 3%, while Netflix stock (NFLX) was flat.
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