Paramount Intensifies Warner Bros. Takeover Bid with Sweetened Offer
Paramount has escalated its aggressive pursuit of Warner Bros. Discovery by enhancing its hostile takeover proposal, introducing new financial incentives for shareholders. The media giant, owned by Skydance, announced on Tuesday that it will provide an additional "ticking fee" to Warner shareholders if the acquisition is not finalised by the end of the year. This fee amounts to 25 cents per share, or a total of $650 million, for each quarter beyond December 31.
Furthermore, Paramount has committed to financing Warner's proposed $2.8 billion breakup payout to Netflix, as stipulated in their existing studio and streaming merger agreement. Despite these new benefits, the core value of Paramount's offer remains unchanged at $30 per share in cash for Warner's stakeholders. The deadline for shareholders to tender their shares has been extended to March 2, marking the third such extension in this ongoing corporate battle.
Strategic Moves and Shareholder Dynamics
In a public statement, Paramount CEO David Ellison emphasised that these "additional benefits" demonstrate the company's "strong and unwavering commitment to delivering the full value WBD shareholders deserve for their investment." Paramount aims to acquire Warner Bros. Discovery entirely for $77.9 billion, with a total enterprise value reaching $108 billion when including debt. This acquisition would encompass not only Warner's studio and streaming operations but also its networks, such as CNN and Discovery.
However, Paramount faces significant challenges in garnering shareholder support. Recent disclosures indicate a decline in backing over the past month. As of Monday, only 42.3 million Warner shares had been "validly tendered and not withdrawn" from Paramount's bid, a sharp drop from over 168.5 million shares on January 21. With approximately 2.48 billion shares outstanding in series A common stock, Paramount requires more than 50% to effectively gain control of the company.
Competing Bids and Regulatory Scrutiny
The takeover contest pits Paramount against Netflix, which has its own agreement with Warner. In December, Netflix agreed to purchase Warner's studio and streaming business for $72 billion in an all-cash transaction, with an enterprise value of about $83 billion, or $27.75 per share when including debt. Netflix and Warner have consistently argued that their deal is superior to Paramount's bid, citing a faster path to a shareholder vote by April.
Paramount counters that its offer is more favourable, highlighting a "sliding scale" value in the Netflix merger that could range from $21.23 to $27.75 per share, depending on debt related to Warner's previously announced spinoff of its networks business. Unlike Paramount, Netflix does not intend to acquire Warner networks like CNN and Discovery; under their agreement, "Discovery Global" would become a separate public company before the merger closes.
Both proposed deals have sparked considerable antitrust concerns among lawmakers worldwide. The U.S. Department of Justice has initiated reviews of Warner's agreement with Netflix and Paramount's hostile bid, with all three companies confirming they have been in contact with the DOJ regarding requests for additional information.
Industry Implications and Future Prospects
The companies involved assert that their mergers will benefit consumers and the entertainment industry by providing streaming customers with larger content libraries. However, unions and trade groups have raised alarms, warning that further consolidation could lead to job losses and reduced diversity in content, potentially harming the filmmaking sector.
Paramount has also promised a proxy fight, having begun soliciting proxies last month to challenge Warner's agreement with Netflix. As the March 2 deadline approaches, the outcome of this high-stakes takeover battle remains uncertain, with significant implications for the future of media and streaming services.
