Over the course of four weeks, Paramount made three proposals to buy Warner Bros. Discovery, increasing the financial value of a deal that could transform the media landscape.
However, all attempts, beginning in mid-September, were rejected, including Paramount’s offer that would have allowed Warner Bros. CEO David Zaslav to remain co-CEO and co-president of the combined company.
The details of these secret proposals were outlined in a letter David Ellison sent to the Warner Bros. board. and which was analyzed by The New York Times.
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The full contents of the letter have not been released until now, but it helps explain what prompted Warner Bros.’s announcement. on Tuesday that the company was for sale.
The decision triggered a public flurry of interest from other potential buyers this week, including Comcast and Amazon. If they make offers, it could pressure Paramount to increase its bid even further.
Warner Bros. Discovery said Tuesday that it has begun the sale process due to “unsolicited multi-party interest” from both parties and the entire company.
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Paramount’s first offer was $19 per share, rising to $22 in late September.
Paramount’s most recent proposal, delivered on Oct. 13, offered to pay shareholders $23.50 per share in cash and stock, according to the letter. This offer represented an 87% premium to Warner Bros.’s share price. Discovery before the intention to make the offer was announced in early September.
On Wednesday, shares of Warner Bros. they closed at US$20.53.
The acquisition of Warner Bros. Discovery by Paramount would represent a tectonic shift for the media industry. It would unite two of Hollywood’s biggest studios, Warner Bros. and Paramount, giving it enormous box office influence and placing CNN and CBS News under the same corporate umbrella, which would give the new company great power over the news industry. It would also combine the streaming services Paramount+ and HBO Max, bringing films and series to hundreds of millions of homes.
“We are confident that we are the best partner for WBD, with the combination of our two companies creating a Hollywood champion at scale, benefiting shareholders, consumers and the entertainment industry as a whole,” Ellison wrote.
Tuesday’s announcement indicated that Warner Bros. Discovery was still considering other options, including plans to split the company into two, announced in June, as well as evaluating competing offers.
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In the letter, Paramount argued that it was the only viable buyer for Warner Bros., stating that any rival bid would likely come from a larger company, subject to rigorous regulatory review. Ellison argued that the deal would create a stronger competitor against these giants.
“Other potential buyers of WBD — today or in the future — would have to overcome significant (perhaps insurmountable) obstacles due to their dominant market positions,” Ellison wrote.
Analysts say no buyer, including Paramount, will escape strict regulatory oversight, given the media industry’s degree of concentration and President Donald Trump’s long-standing animosity toward CNN.
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Paramount already has a significant movie studio, and Comcast abandoned its bid for Time Warner Cable in 2015 due to antitrust concerns.
Amazon, with more than 200 million subscribers, is the second largest streaming platform in the country, behind only Netflix. It also faced antitrust scrutiny in Europe, where regulators would need to approve any deal.
Political considerations could also influence the analysis, according to analysts.
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“One of the things I think is really critical here is the politics behind this: Which one would Donald Trump like or not?” said Peter Cohan, a professor at Babson College. “Would he be willing to act because one of his supporters is involved?”
Larry Ellison, father of David Ellison and supporter of the bid, has a friendly relationship with Trump, which could help in the approval process, according to analysts. They also highlight Trump’s criticism of Comcast president Brian Roberts, the target of attacks on social media.
Comcast, Paramount and Warner Bros. Discovery declined to comment.
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Ellison, 42, the new media mogul who this summer took control of Paramount, has been investing freely to reposition the company. He acquired U.S. rights to the Ultimate Fighting Championship, signed the creators of Netflix’s “Stranger Things” and bought news site The Free Press.
“Our recent series of exclusive content agreements indicates the type of investments we could make together,” Ellison wrote.
In the letter, Ellison argues that selling is a better path than the company’s division, scheduled for April. He argues that Warner Bros.’s cable business is Discovery will face intense pressure after losing the rights to NBA games, and that the streaming service, including HBO Max, will struggle to compete with giants like YouTube and Netflix.
Ellison said analysts estimate the per-share value for shareholders in a Warner Bros. division to be the same. Discovery would, on average, be about $15 — well below the offering price of $23.50 per share.
The letter also details other concessions made by Paramount to convince the Warner Bros. board: it increased the portion of the cash payment to shareholders from 60% to 80% and raised the fee to be paid to shareholders if the deal is not approved, from US$2 billion to US$2.1 billion.
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