Warner Bros. Discovery is likely to reject Paramount Skydance’s hostile takeover offer, according to people close to the matter, because of questions about financing and other conditions of the proposal.
After reviewing Paramount’s offer, the Warner Bros. board agreed to believes that the agreement it already has with Netflix offers more value, security and better terms than what was presented by the competitor, said the sources, who preferred not to be identified as the information is confidential.
Warner Bros.’ official response Paramount’s public offering could be announced as early as this Wednesday, according to the same sources.
No definitive decision has been made yet, and the situation remains open, they added. Warner Bros. representatives and Paramount declined to comment.
One of the main points that concerns Warner Bros. is the financing proposed by Paramount, led by David Ellison.
Much of the capital is guaranteed by a trust that manages the fortune of his father, technology billionaire Larry Ellison. Because this trust can be revoked at any time, the assets can be withdrawn, and Warner Bros. You may not be able to protect yourself if this happens, the sources explained.
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The Warner Bros. board is also concerned about the company’s ability to continue operating normally during the long period it may take for the sale to be approved by regulators. Paramount would not be offering enough flexibility to Warner Bros. manage their businesses and finances, according to the sources.
Paramount, which owns CBS and MTV, said in a document last week that it has already responded to Warner Bros.’ concerns. on the flexibility to refinance debt and on the payment of a $5 billion termination penalty, which would be guaranteed by the Ellison family.
The company also adjusted other terms of the offer in response to requests from Warner Bros. A contribution of about $1 billion from China’s Tencent Holdings Ltd. was withdrawn over concerns that the investment could raise national security concerns for U.S. regulators.
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This month, Warner Bros. closed a deal to sell its studios, streaming business and HBO to Netflix for $27.75 per share, totaling about $83 billion, including debt. The deal ended a weeks-long dispute between Netflix, Paramount and Comcast. Separately, Warner Bros. plans to spin off cable networks like CNN and TNT to shareholders before the Netflix deal closes.
Paramount offered to buy all of Warner Bros. for $30 per share, or more than $108 billion, including debt. Three days after the announcement of the deal between Netflix and Warner Bros., Paramount launched a public offering to buy Warner Bros. shares. directly from shareholders.
Paramount said the $30 per share offer is not the “best and last,” indicating that it may increase the proposal. Warner Bros. shares are trading at US$29.109, which shows that some investors are expecting a higher value.
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The Warner Bros. deal with Netflix prevents the company from seeking proposals from other buyers, but allows it to evaluate offers that arise. If a better proposal comes along, Warner Bros. should give Netflix the chance to match the offer to try to maintain the current agreement, as provided for in the contract.
