Paramount Skydance on Thursday reiterated that its $108.4 billion bid for Warner Bros Discovery was superior to a rival deal from Netflix, saying the value of the cable spinoff central to the streaming giant’s offer was effectively worthless. Warner Bros Discovery’s board on Wednesday rejected Paramount’s amended hostile offer that included a $40 billion in equity personally guaranteed by Oracle’s co-founder Larry Ellison, the father of Paramount CEO David Ellison, and $54 billion in debt.
The CBS parent and Netflix have been in a heated battle for Warner Bros, its prized film and television studios, and its extensive content library that includes “Harry Potter” and the DC Comics universe. Paramount’s argument – one it is using to sway investors – is that its all-cash $30-per-share offer for the whole of Warner Bros is superior to Netflix’s $27.75 a share cash-and-stock deal for the studios and streaming assets and will more easily clear regulatory hurdles. The Netflix deal is worth $82.7 billion. In its response on Thursday, Paramount even went so far as to suggest that the cable properties of CNN and Discovery, which Netflix does not want, are effectively worth less than nothing, based on an equity valuation of the recently floated Versant Media, a Comcast spinoff that includes digital assets and TV channels such as CNBC. That stock has dropped 18% since its market debut on Monday.
That sour performance has given fresh ammunition to Paramount’s campaign to convince Warner Bros shareholders its offer is better. On Thursday, it said it values the Warner Bros cable spinoff at zero – or even less than that, due to its high leverage and lagging performance. “While Discovery Global equity would have no equity value if the company trades in line with Versant, there are in fact several compelling reasons why it should trade at a discount to Versant,” Paramount said Thursday. Paramount said the Netflix offer would reduce the cash paid to shareholders if Warner Bros loads more debt onto the merger. The company argues the cash payout could drop to $20 per share, from the current offer of $23.25, if Warner Bros were to adopt the leverage in line with Versant. Warner Bros did not immediately respond to a request for comment. Netflix cited its Wednesday statement that its offer is the superior deal and will deliver the greatest value.
Shares of Warner Bros and Netflix were down less than 1 percent each, while those of Paramount ticked up 0.6%. “It would be surprising if the shareholders were swayed by the argument because they’ve likely already considered the declining value of linear TV assets when they agreed to split the company and sell the growing portion to Netflix,” said Ross Benes, senior analyst at eMarketer. “But Paramount has a point – fading TV networks aren’t appealing to most investors.” Paramount’s tender offer will expire on January 21, but the company can extend it.
