Paramount Skydance CEO and chairman David Ellison has said he “did not receive a single call back” from Warner Bros Discovery (WBD) after submitting a revised offer for WBD last Thursday (December 4), prior to the announcement of the Netflix deal on Friday (December 5).
“On Thursday, we submitted our fully financed superior offer, an offer that directly addressed every concern with our previous bid that they laid out, yet we did not receive a single call back. That brings us here today,” said Ellison in an investors’ call, speaking alongside his colleagues Andy Gordon, chief strategy officer and chief operating officer and Kevin Creighton, EVP of investor relations.
Earlier today, Paramount revealed it had bypassed the WBD board and gone directly to WBD shareholders to offer an all-cash $30 a share for the entirety of the WBD business, compared to Netflix’s $27.75 mix of cash ($23.25) and stock ($4.50) for Warner Bros only.
The equity is to be backstopped by the Ellison Family and RedBird Capital in addition to debt fully committed by Bank of America, Citi and Apollo.
A filing confirmed Paramount’s tender offer is also supported by $24bn in debt financing from sovereign wealth funds from Saudi Arabia, Qatar and Abu Dhabi, as well as from Donald Trump’s son-in-law Jared Kushner’s Affinity Partners, with these parties forgoing governance in the company.
The executives did not directly respond to a question during the investors’ call regarding why the Middle East funds would invest if they were forsaking governance.
The tender offer is open for 20 business days, and WBD will need to respond within 10 business days. After 20 business days, Gordon said Paramount Skydance has the option to continue to extend the offer “for as long as it makes sense for the WBD shareholders”.
Paramount Skydance brought its counteroffer directly to shareholders as Ellison said they believe the shareholders “deserve transparency”.
The Paramount Skydance execs invited shareholders to question if WBD thoroughly reviewed Paramount Skydance’s revised offer; if the sale process was fair and robust; what value WBD is attributing to the remaining Global Networks equity that shareholders would receive; and what supports the view that Netflix can clear regulatory hurdles in a reasonable timeframe.
The execs suggested that a Netflix deal would take at least six months longer than their own to close, while facing regulatory hurdles in the US and internationally. Paramount Skydance estimates it would take the company about 12 months to close. They predict that six months of additional close time for Netflix would lower the value of the cash and Netflix stock components of their offer by $1.25 per share.
“There’s also additional risk tied to closing certainty and the non-cash elements of the Netflix proposal, including the Global Network’s value,” added Ellison.
The execs said the only regulatory condition Paramount Skydance needed to satisfy was anti-trust, which they are “confident” they could get through.
Theatrical commitment
The execs also pointed out the combination of Netflix and HBO Max would lead to a 43% share of all global SVoD subscribers and 30% of US subscribers, with Netflix having over 300 million global subscribers, and HBO Max with 125 million subscribers, which would be “harmful to film and TV industry, undermine creative talent, threaten higher prices for consumers and threaten the future of theatrical releases”.
Paramount Skydance has committed to making 30 films a year for theatrical release. “Movies are one of America’s greatest exports; we want to lean into that legacy, rather than diminish it,” said Ellison.
He continued, “This transaction is about building more, not cutting back. More opportunity for the industry, more choice for consumers, more value for shareholders, and more support for creative talent. Our focus is on expanding creative output, not dominating the sector.
Paramount+ has around 79 million subscribers, which they say combined with Warner Bros Discovery’s platform subscribers of 122 million would put them on a par with Disney at around 200 million, but still below the 310 million of Netflix, and still below Amazon, with Ellison describing the deal as “pro-Hollywood, pro-competition and pro-consumer”.
When asked how Paramount Skydance plans to make its promised $6bn in cost savings through the deal, given Paramount and Warner Bros have gone through rounds of layoffs and cost-cutting going back three years, Gordon said: “We’re very focused on maintaining the creative engines of the company, and so the costs really go to duplicative functions on back office, finance, corporate, legal, technology, infrastructure, etc. We feel confident in the $6bn number.”
No comments yet