Paramount Skydance‘s 11th-hour, hostile $108.4 billion bid for Warner Bros Discovery was rooted in what it considered a lack of responsiveness from Warner Bros to its ardent overtures late last week, a securities filing on Monday showed.
Paramount offered a blow-by-blow account of Paramount CEO David Ellison’s communication over months with his counterpart David Zaslav at Warner Bros in the lengthy filing, which led to Paramount bidding for Warner Bros in September. That bid was rebuffed, as were the next two that Paramount said offered improved terms.
Finally, Zaslav called Ellison on December 3 to relay concerns from Warner Bros’ board about Paramount’s bid. Later that same day, Warner Bros’ legal advisers told Paramount’s counsel that the board viewed the absence of a full backstop from Ellison’s family as a negative, despite the involvement of deep-pocketed sovereign wealth funds. They also flagged potential scrutiny from U.S. regulators.
On December 4, following a Paramount Skydance board meeting where it agreed to improve a previous offer, Ellison texted Zaslav according to the regulatory filing. “I heard you on all your concerns and believe we have addressed them in our new proposal. Please give me a call back,” Ellison told Zaslav in the text.
By mid-morning that day, Paramount sweetened its bid. But having received no response from Zaslav to his text, Ellison tried again at around 4 p.m. EST, adding a personal appeal: “It would be the honor of a lifetime to be your partner.”
Paramount’s bankers and Ellison told Warner Bros and Zaslav that their new $30 per share offer – or $108.4 billion – was “not best and final,” signaling they could go higher. But Ellison’s phone never rang. By 11 p.m. that night, media reports swirled that Warner Bros had entered exclusive talks with Netflix to sell its TV and film studios as well as the streaming business that houses HBO Max. By Friday, Netflix and Warner Bros announced a deal. On Monday, Paramount took its offer directly to Warner Bros shareholders, heating up a bidding war whose outcome will reshape the media industry.
Asked to comment on the Paramount securities filing, Warner Bros Discovery said: “The board and the company have for months run a completely fair and transparent process with each of the bidders, and the bids speak for themselves.”
At stake in the race are some of Hollywood’s crown jewels including the Warner Bros studio, DC Comics and HBO. A deal will help Netflix extend its lead in the streaming wars, while Paramount would gain the scale in streaming to compete better with the streaming giant as well as cable assets such as CNN.
Persuasion
Bypassing a Warner Bros board that it says has “never engaged meaningfully,” Paramount is betting it can persuade investors that its all-cash offer tops Netflix’s $82.7 billion enterprise bid. Paramount’s Ellison is the son of the world’s second-richest man, Oracle co-founder Larry Ellison, who is also an ally of President Donald Trump. David Ellison has touted a quicker path to regulatory approval to investors. His Skydance Media bought Paramount Global in August, overcoming regulatory hurdles.
For its bid for Warner Bros, Paramount dropped Chinese tech firm Tencent from the investor group and secured a waiver on all governance rights from the remaining outside investors, a structure it said puts the deal outside the jurisdiction of the Committee on Foreign Investment in the United States.
Its offer is backstopped by the Ellison family and includes financing from Affinity Partners, an investment firm run by Jared Kushner, Trump’s son-in-law, and several Middle Eastern government-run investment funds.
Warner Bros said it would review Paramount’s offer, but was not yet modifying its recommendation with respect to Netflix. Netflix co-CEO Ted Sarandos said Paramount’s hostile bid for Warner Bros was “entirely expected,” but added that he was confident of closing the deal.
Accusations of biased process
The alleged breakdown in communications between Paramount and Warner Bros Discovery marked a sharp reversal from earlier, according to Paramount’s filing. The Ellisons had dined with Zaslav on November 24, discussing the benefits of a deal and potential co-CEO and co-chairman roles for Zaslav in the combined company.
But the warmth was short-lived. Paramount alleged delays by Warner Bros in signing a “clean team” agreement needed to review sensitive data, prompting its legal counsel to warn WBD’s advisers that Paramount “would be disadvantaged” without access.
Paramount also cited in its filing a CNBC interview of Warner Bros Chairman Emeritus John Malone last month where he “lamented how Paramount ‘interrupted’ the Warner Bros separation and discussed the merits of Netflix as a bidder.”
Paramount’s tender offer will be open for 20 business days and can be extended. Warner Bros has 10 days to respond.
“We’re here to fight for value for our shareholders and for WBD shareholders,” David Ellison said on Monday.