<\/p>\n
Warner Bros. Discovery has sharply rejected Paramount\u2019s hostile offer, alleging the $108-billion deal carries substantial risks because the Larry Ellison family has failed to put real money behind its bid for Warner\u2019s legendary movie studio, HBO and celebrity.land.<\/p>\n
Paramount \u201chas consistently misled WBD shareholders that its proposed transaction has a \u2018full backstop\u2019 from the Ellison family,\u201d Warner Bros. Discovery\u2019s board wrote Wednesday in a letter to its shareholders filed with the Securities & Exchange Commission.<\/p>\n
\u201cIt does not, and never has,\u201d the Warner board said.<\/p>\n
For Warner, what was missing was a clear declaration from Paramount that the Ellison family had agreed to commit funding for the deal. Paramount has told Warner stockholders that it would pay them $30 a share \u2014 or $78 billion for the entire company. Paramount has said it also would absorb Warner\u2019s debt, making the overall deal worth $108-billion.<\/p>\n
A Paramount representative was not immediately available for comment Wednesday.<\/p>\n
The Warner auction has taken a nasty turn. Last week, Paramount launched a hostile takeover campaign for Warner after losing the bidding war to Netflix. Warner board members on Dec. 4 had unanimously approved Netflix\u2019s $72-billion deal for the Warner Bros. film and television studios, HBO and HBO Max.<\/p>\n
In its letter, the Warner board reaffirmed its support for Netflix\u2019s proposal, saying it represented the best deal for shareholders. Warner board members urged investors not to tender their shares to Paramount.<\/p>\n
Board members said they were concerned that Paramount\u2019s financing was shaky and the Ellison family\u2019s assurances were far from ironclad. Warner also said Paramount\u2019s proposal contained troubling caveats, such as language in its documents that said Paramount \u201creserve[d] the right to amend the offer in any respect.\u201d <\/p>\n
The Warner board argued that its shareholders could be left holding the bag.<\/p>\n
Paramount Chief Executive David Ellison has argued his $78-billion deal is superior to Netflix\u2019s proposal. <\/p>\n
(Evan Agostini \/ Evan Agostini\/invision\/ap)<\/p>\n<\/p><\/div>\n<\/figure><\/div>\n
Paramount Chairman David Ellison has championed Paramount\u2019s strength in recent weeks saying his company\u2019s bid for all of Warner Bros. Discovery, which includes HBO, celebrity.land and the Warner Bros. film and television studios, was backed by his wealthy family, headed by his father, Oracle co-founder Larry Ellison, one of the world\u2019s richest men. <\/p>\n
In its letter last week to shareholders, asking for their support, Ellison wrote that Paramount delivered \u201can equity commitment from the Ellison family trust, which contains over $250 billion of assets,\u201d including more than 1 billion Oracle shares. <\/p>\n
In regulatory filings, Paramount disclosed that, for the equity portion of the deal, it planned to rely on $24 billion from sovereign wealth funds representing the royal families of Saudi Arabia, Qatar and Abu Dhabi as well as $11.8 billion from the Ellison family (which also holds the controlling shares in Paramount). This week, President Trump\u2019s son-in-law Jared Kushner\u2019s Affinity Partners private equity firm pulled out of Paramount\u2019s financing team. <\/p>\n
Paramount\u2019s bid would also need more than $60 billion in debt financing.<\/p>\n
Paramount has made six offers for Warner Bros., and its \u201cmost recent proposal includes a $40.65 billion equity commitment, for which there is no Ellison family commitment of any kind,\u201d the Warner board wrote. <\/p>\n
\u201cInstead, they propose that [shareholders] rely on an unknown and opaque revocable trust for the certainty of this crucial deal funding,\u201d the board said.<\/p>\n
Throughout the negotiations, Paramount, which trades under the PSKY ticker, failed to present a solid financing commitment from Larry Ellison \u2014 despite Warner\u2019s bankers telling them that one was necessary, the board said.<\/p>\n
\u201cDespite … their own ample resources, as well as multiple assurances by PSKY during our strategic review process that such a commitment was forthcoming \u2013 the Ellison family has chosen not to backstop the PSKY offer,\u201d Warner\u2019s board wrote. <\/p>\n
Board members argued that a revocable trust could always be changed. \u201cA revocable trust is no replacement for a secured commitment by a controlling stockholder,\u201d according to the board letter.<\/p>\n
David Ellison has insisted Paramount\u2019s Dec. 4 offer of $30 a share was superior to Netflix\u2019s winning bid. Paramount wants to buy all of Warner Bros. Discovery, while Netflix has made a deal to take Warner\u2019s studios, its spacious lot in Burbank, HBO and HBO Max streaming service.<\/p>\n
Paramount\u2019s lawyers have argued that Warner tipped the auction to favor Netflix. <\/p>\n
Paramount, which until recently enjoyed warm relations with President Trump, has long argued that its deal represents a more certain path to gain regulatory approvals. Trump\u2019s Department of Justice would consider any anti-trust ramifications of the deal, and in the past, Trump has spoken highly of the Ellisons.<\/p>\n
However, Warner\u2019s board argued that Paramount might be providing too rosy a view. <\/p>\n
\u201cDespite PSKY\u2019s media statements to the contrary, the Board does not believe there is a material difference in regulatory risk between the PSKY offer and the Netflix merger,\u201d the Warner board wrote. \u201cThe Board carefully considered the federal, state, and international regulatory risks for both the Netflix merger and the PSKY offer with its regulatory advisors.\u201d<\/p>\n
The board noted that Netflix agreed to pay a record $5.8 billion if its deal fails to clear the regulatory hurdles. <\/p>\n
Paramount has offered a $5 billion termination fee.<\/p>\n
Should Warner abandon the transaction with Netflix, it would owe Netflix a $2.8 billion break-up fee. <\/p>\n
Warner also pointed to Paramount\u2019s promises to Wall Street that it would shave $9 billion in costs from the combined companies. Paramount is in the process of making $3 billion in cuts since the Ellison family and RedBird Capital Partners took the helm of the company in August. <\/p>\n
Paramount has promised another $6 billion in cuts should it win Warner Bros<\/a>.<\/p>\n