The board of Warner Bros. Discovery unanimously rejected Paramount Skydance’s latest attempt to acquire the studio, saying its revised $108.4 billion hostile bid amounted to a risky leveraged buyout that investors should reject.
In a letter to shareholders this Wednesday (7), the Warner Bros board said that Paramount’s offer depends on ‘an extraordinary amount of debt financing’ that increases the risk of closing the deal. The company reaffirmed its commitment to streaming giant Netflix’s $82.7 billion deal to acquire the film and television studio and other assets.
Paramount and Netflix have been vying for control of Warner Bros. and, with it, its valuable film and television studios and extensive content library. Its lucrative entertainment franchises include “Harry Potter,” “Game of Thrones,” “Friends” and the DC Comics universe, as well as coveted classic films such as “Casablanca” and “Citizen Kane.”
Paramount’s financing plan would saddle Hollywood’s smallest studio with $87 billion in debt upon completion of the acquisition, making it the largest leveraged buyout in history, Warner Bros. board told shareholders after voting against the $30-per-share cash offer on Tuesday. The letter accompanied a 67-page amended merger document in which it laid out its arguments for rejecting Paramount’s offer.
Paramount’s revised offer “remains inadequate, particularly given the insufficient value it would provide, the uncertainty regarding PSKY’s ability to complete the offer, and the risks and costs borne by WBD shareholders if PSKY is unable to complete the offer,” the Warner Bros. board wrote.
Paramount, which has a market value of about $14 billion, has proposed using $40 billion in capital guaranteed personally by Oracle’s billionaire co-founder Larry Ellison and $54 billion in debt to finance the deal.
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Its financing plan would further weaken its credit rating, which S&P Global already classifies as junk, and put pressure on its cash flow — increasing the risk that the deal will not close, the Warner Bros. board said. Netflix, which offered $27.75 per share in cash and stock, has a market value of $400 billion and an investment-grade credit rating.
