Warner Bros Discovery Investors Divided Over Paramount, Netflix Acquisition Bids
- tech360.tv
- 12 hours ago
- 3 min read
Some major investors in Warner Bros Discovery are divided over a sweetened offer from Paramount Skydance for the storied movie studio owner. The Warner Bros Discovery board considers the Paramount proposal inferior to its existing agreement with Netflix.
Paramount Skydance's latest proposal is valued at USD 108.4 billion, offering USD 30 per share. While Netflix, the creator of “Stranger Things,” offered USD 27.75 per share, totalling USD 82.7 billion, Warner Bros Discovery stated Netflix’s financing is more solid.
The board also noted that Paramount’s deal would result in excessive debt for the merged organisation. Warner Bros Discovery indicated the Paramount offer would not cover the USD 2.8 billion breakup fee owed to Netflix, the USD 1.5 billion in fees to its bankers, or the USD 350 million in financing costs.
The combined company would face USD 87 billion in debt under the Paramount deal, according to Warner Bros Discovery. Alex Fitch, partner and portfolio manager for Harris Oakmark, which held approximately 96 million shares, or four percent, of Warner Bros Discovery, agrees with the board’s assessment.
“The value still is not clearly superior to what has already been agreed to with Netflix,” Fitch commented, adding, “A tie goes to the incumbent.” Chief Investment Officer Yussef Gheriani of IHT Wealth Management, which holds approximately 16,000 Warner Bros Discovery shares, supported the board’s rejection.
Gheriani explained that the overall value increase might not justify the breakup fees and borrowing costs. Conversely, Matthew Halbower of Pentwater Capital Management, which reported owning more than 50 million shares, expressed a differing view.
Halbower informed Warner Bros Discovery Chairman Samuel DiPiazza in a letter that the board “breached its fiduciary duty” to shareholders by rejecting Paramount’s offer. He contended it was a superior deal with a higher likelihood of regulatory approval.
The Warner Bros Discovery board "Is choosing not to inquire about what improvements Paramount is willing to make to its offer,” Halbower wrote in the letter. He added that if Paramount further improves its USD 30-per-share offer, the board should engage with the suitor, otherwise his firm would not support any Warner Bros Discovery directors at their upcoming election.
Mario Gabelli, whose Gabelli Funds holds approximately 5.7 million Warner Bros Discovery shares, stated he is “likely” to sell his shares to Paramount. He believes Paramount’s all-cash offer is more straightforward and offers a faster path to regulatory approval.
“At the moment, Paramount has a superior bid,” Gabelli told CNBC, adding, “Netflix has to simplify its bid.” Harris Oakmark, the fifth-largest shareholder in Warner Bros Discovery, remains open to changing its position.
“If they come back to the table with a clearly superior offer,” Fitch said, “we have full confidence that the WBD board will engage.” Warner Bros Discovery, owning HBO Max, is considered a marquee media asset, which rarely comes to market.
Its extensive content library includes “Harry Potter” and the DC Comics universe. Its HBO Max streaming service recently acquired the U.S. and Australian distribution rights to the Canadian hockey romance “Heated Rivalry.”
Vanguard, State Street, and BlackRock are the top three shareholders in Warner Bros Discovery, collectively controlling approximately 22%. These fund managers are also among the top ten investors in both Paramount and Netflix. All three firms declined to comment.
Warner Bros Discovery (WBD) investors are divided on a sweetened acquisition offer from Paramount Skydance.
The WBD board rejected Paramount's USD 108.4 billion offer, preferring Netflix's USD 82.7 billion bid due to more solid financing and less debt.
Board supporters cite significant breakup fees, banker fees, and financing costs that Paramount's offer would not cover, alongside high debt levels.
Source: REUTERS