Paramount has submitted its latest bid to acquire Warner Bros. Discovery, but one of WBD’s major investors has not accepted it.
Harris Associates, representing Warner Bros.’ fifth-largest shareholder, has warned of the latest bid from David Ellison’s Paramount, saying it is still not the best deal for the pending WBD deal. As of the end of September, Harris held about 4% of WBD’s shares, totaling 96 million shares.
“The change in Paramount’s new offer is necessary but not sufficient,” Alex Fitch, portfolio manager and U.S. research director at Harris Oakmark, told Reuters on Tuesday. “We think these two deals are a toss-up and changing paths comes at a cost. If Paramount really wants to win, they’re going to need to offer bigger incentives.”
On Monday, David Ellison returned to the negotiating table with a revised offer that included a personal guarantee from his father, Larry Ellison, the billionaire co-founder of Oracle Corp. and the world’s second-richest man. The new terms also include an agreement for Paramount not to revoke David’s trust, more flexible financial terms and a higher breakup fee of $5.8 billion to match Netflix’s offer.
“We expect the WBD Board of Directors to take the necessary steps to ensure the smooth progress of this accretive transaction and preserve and enhance this iconic Hollywood treasure for the future,” said David Ellison.
WBD’s top shareholders appear to be open to such an amendment. As recently as December 18, Fitch told Reuters that he and other shareholders were willing to listen to Paramount’s revised bid as the battle for ownership of WBD heated up. At the time, Fitch noted that Netflix’s $82.7 billion deal to acquire Warner Bros. studios and streaming assets was “superior in deal terms” but “comparable in value to Paramount’s offer for the entire company.”
“The good news is that concerns over the terms of the deal appear to be fully resolvable,” Fitch added at the time. “We would be very open to a revised offer from Paramount if they decide to raise higher financial considerations and properly address the terms of the deal. The ball is in their court.”
Those revisions still don’t seem good enough for Fitch, which says Paramount may come up with a better offer. Only time will tell whether Paramount can make such an offer in a rapidly changing situation — Netflix executives are embarking on a studio tour and Paramount is mired in another “60 Minutes” quagmire.
“Paramount’s updated offer does not change the fact that WBD executives prefer Netflix,” said eMarketer analyst Ross Benes. “The new takeover bid does make Paramount’s proposition more attractive to the board and shareholders. But WBD executives will continue to keep the Netflix deal alive for as long as possible. This fight will continue for a long time.”
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