David Ellison

Source: Skydance Media

David Ellison

Paramount CEO David Ellison sent a letter on Wednesday to Warner Bros Discovery (WBD) shareholders, making a personal and professional case to buy the entire company in an ongoing campaign that has produced six bids over 12 weeks.

The missive distilled information from Paramount’s SEC (Securities And Exchange Commission) filing on Tuesday, which noted the $30 per share all-cash bid and said that the Ellison family and RedBird have collectively committed to backstop 100% of the $40.7bn of equity capital required for the transaction.

“Paramount began pursuing Warner Bros. Discovery (“WBD”) because we, along with our partner RedBird Capital, believe we are the best stewards not only to build long-term value for the asset but also delight audiences and help cultivate a more vibrant creative community,” Ellison wrote in Tuesday’s letter.

“We funded, founded and then merged Skydance with Paramount and know the sacrifices and investment it takes to capitalise and grow a media business. I am passionate and dedicated to this pursuit, committed to putting my own money in, and that is why I am writing to you today.”

The letter continued, in Ellison’s capital letters: “Our public offer – identical to the terms we presented to WBD privately [on December 4] – delivers superior value and a faster, more certain path to completion than the transaction announced with Netflix. IT IS NOT TOO LATE TO REALIZE THE BENEFITS OF PARAMOUNT’S PROPOSAL IF YOU CHOOSE TO ACT NOW AND TENDER YOUR SHARES.”

Ellison argues that Paramount’s offer will deliver better value to WBD shareholders than the Netflix bid that was accepted by WBD last week. Paramount’s offer for the entire WBD values the company’s equity at $77.9bn rising to an enterprise value of $108.4bn including debt and noncontrolling interest. Netflix’s $27.75 offer per WBD share in cash and stock is for WBD’s studios and streaming business only and assigns an equity value of $72bn to WBD and an enterprise value of approximately $82.7bn.

The Paramount CEO wrote that Netflix’s cash component is approximately $18bn lower than Paramount’s “in the aggregate” of roughly $7 per share. Ellison noted that Paramount’s financing was “air tight” and had a clearer path to regulatory approval, as opposed to Netflix, which he said faces “a long and bumpy ride” with a combined Netflix-HBO Max streaming business that would achieve approximately 43% of market share, and a vertically-integrated business that would “give Netflix greater leverage over theatrical exhibitors and creative talent alike”.

The letter went on to say that Netflix’s regulatory path is “particularly challenged in Europe where its dominance is far more entrenched […] The acquisition of WBD’s streaming & studios business is a blatant attempt to eliminate one of Netflix’s only viable international competitors in HBO Max”.

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