American film producer David Ellison arrives at the premiere of Paramount's “Transformers: Rise Of The Beasts” in New York City on June 5, 2023.
Angela Weiss | afp | fake images
supreme skydance on Monday secured the backing of billionaire Larry Ellison in a modified bid by Warner Bros. Discovery — a clear answer to the questions posed by the WBD board of directors.
“Larry Ellison has agreed to provide an irrevocable personal guarantee of $40.4 billion of the equity financing for the offering and any claims for damages against Paramount,” the company said in a news release.
Paramount said Ellison, the father of Paramount CEO David Ellison, also agreed not to revoke the Ellison family trust or adversely transfer its assets during a pending transaction. The guarantee does not replace committed funds from RedBird Capital and sovereign wealth funds, but rather constitutes a new layer of security for commitments.
Paramount Skydance is offering $30 a share, all cash, for Warner Bros. Discovery in a hostile bid intended to rival a deal with netflix.
Last week, Warner Bros. Discovery president Samuel Di Piazza told CNBC's David Faber that the board was concerned about the alleged endorsement of Oracle co-founder Larry Ellison on the offering.
“We weren't sure that one of the richest people in the world was there at the time of the closing,” Di Piazza said at the time. “Closing a deal is great; closing a deal is better.”
Earlier this month, WBD agreed to sell its studio and streaming assets to Netflix in a transaction valued at approximately $83 billion at the enterprise level. Paramount wants to buy all of WBD, including its portfolio of television networks, and says its offer has an enterprise value of $108.4 billion.
Notably, Paramount did not raise its offer on Monday, reiterating that it believes the deal is superior, although it did raise its proposed reverse breakup fee to match Netflix's offer.
WBD confirmed receipt of the revised offer on Monday and said in a statement that it would “carefully review and consider Paramount Skydance's offer in accordance with the terms of Warner Bros. Discovery's agreement with Netflix.”
“What we've done in this amended filing is we've cleared up the confusion around the offering,” Gerry Cardinale, founder and managing partner of RedBird Capital Partners, said on CNBC's “Squawk Box” on Monday.
RedBird is an investor in Paramount Skydance and has also agreed to fund Paramount's proposed acquisition of WBD.
Cardinale said Monday that as part of the amended filing, Larry Ellison would support the offering through an irrevocable trust, which is backed by 1.2 billion Oracle shares.
“As we have with the six offers we have submitted, we are responding to their concerns,” Cardinale said.
Shares of Warner Bros. Discovery rose 3% in early trading Monday, while Paramount gained more than 7%. Netflix shares fell almost 1%.
Paramount vs. Netflix
Paramount made three offers for WBD in the fall, all of which were rejected by the company. WBD then launched a formal sales process that attracted bids from other bidders, including Netflix.
Cardinale said Paramount's unsolicited offers likely spurred WBD to open itself to a sale, putting Paramount “a little bit on the defensive.”
During Monday's interview on CNBC, Cardinale, like Ellison on CNBC last week, appealed directly to WBD shareholders.
“At the end of the day…the shareholders own this company. The board of directors don't own it. [CEO] David Zaslav does not own this company,” Cardinale said. “This should be much simpler than it is. It's very simple.”
In addition to the question of value between the two offerings, Paramount and industry observers have also raised the question of regulatory approval.
“The deal with Netflix kills the competition,” Cardinale said, adding that a combination of streaming platforms Netflix and HBO Max would create 420 million subscribers under one roof. “It's no wonder ecosystem components (talent, creators, theatrical exhibitors) are losing their minds over this because they see the pricing power it will create.”
Netflix co-CEOs Ted Sarandos and Greg Peters have said they are confident their deal would pass regulatory review. Sarandos has also given assurances about the future of WBD's theatrical programming under Netflix ownership.
At a conference in early December, Sarandos argued that Netflix's bid for WBD's assets would preserve jobs at a time of growing layoffs across the industry.
