The bidding war for Warner Bros. Discovery Inc. produced a flurry of updates last week, including Paramount Skydance Corp. suing Warner Bros. Discovery and Netflix Inc. considering an all-cash bid.
Warner Bros. Discovery entered into a definitive agreement with Netflix to sell its streaming and studios division for $82.7 billion in cash and stock in December, against which Paramount launched a $108.4 billion all-cash tender offer for its entire business. Now, Paramount said the HBO owner failed to disclose critical financial details to its shareholders, which they needed to “make an informed investment decision on (Paramount’s) offer.” This broke Delaware law, according to the media and entertainment company’s lawsuit filed Jan.12 to Delaware Chancery Court.
In a letter to Warner Bros. Discovery shareholders, Paramount Chief Executive David Ellison wrote that Warner Bros. Discovery failed to share its valuation for the Global Networks stub equity, the Netflix transaction and the basis for its risk adjustment in the Paramount bid. He also wrote that Warner Bros. Discovery has failed to engage with Paramount’s offer, and the company remains “perplexed.”
“Even as we read WBD’s own narrative of its process, we are struck that there were few actual board meetings in the period leading up to the decision to accept an inferior transaction with Netflix,” wrote Ellison. “It just doesn’t add up – much like the math on how WBD continues to favor taking less than our $30 per share all-cash offer for its shareholders.”
All-cash option
Ellison added that Paramount will nominate directors who will transact with Paramount ahead of Warner Bros. Discovery’s annual meeting. It will also propose that Warner Bros. Discovery require shareholder approval for Global Networks’ separation and launch a proxy war should Warner Bros. Discovery call for a special meeting to vote before the annual meeting.
Bloomberg News reported Jan. 13 that Netflix was considering changing its bid to an all-cash offer. This means a faster timeline for Warner Bros. Discovery shareholders to vote for approval, which could be as soon as late February or early March, according to CNBC.
Shareholders are divided on the deal. The seventh largest shareholder, Pentwater Capital Management, favors Paramount. Others disagree with Paramount’s “superior” argument.
Bill Nygren, chief investment officer-U.S. of Harris Associates, the fifth largest Warner Bros. shareholder, told CNBC that despite offering “a few pennies” better than the other, the Paramount offer does not meet “the hurdle of substantially significant.”
Nygren expected the two may still raise their prices.
“We don’t think we’ve seen the best bid yet from either company,” Nygren said. “I think either side at this point would be foolish to walk away.”
