Paramount Attempts Hostile Takeover of Warner Bros. Discovery with Funding from Jared Kushner and Saudis

Warner Bros. Discovery accepted Netflix’s buyout offer, but David Ellison’s Paramount team isn’t going to go down without a fight. Today, Paramount announced a $108.4 billion offer for WBD, going directly to shareholders to argue why their offer is better. (Netflix’s offer has been estimated around $82.7 billion, though there’s some fine print that makes that number a bit fuzzy.)

Paramount’s Claims

• Paramount says it never received a response from WBD to its $30/share offer.
  
• Paramount is warning WBD shareholders that the Netflix deal would leave them holding the bag on the debt-ridden Discovery Global company – the planned spin-off operation that will have most of the WBD cable channels.
  
• Paramount argues it can close the deal in 12 months, as opposed to the 12-18 months expected with the Netflix deal. This is because Ellison already bent over backwards to grovel to the Trump administration to acquire Paramount. There’s a relationship there.
  
• Paramount believes the Netflix deal would be bad for Hollywood, and Paramount says it would release 30 movies per year if they can acquire Warner Bros. Discovery. (I would wager they would never come close to that number.)

Warner Bros. Discovery says its Board of Directors “will carefully review and consider Paramount Skydance’s offer in accordance with the terms of Warner Bros. Discovery’s agreement with Netflix.” WBD will reveal the board’s recommendation “within 10 business days.”

Netflix Plays It Cool

“Today’s move was entirely expected,” said Netflix co-CEO Ted Sarandos at the UBS Global Media and Communications Conference, “We have a deal done, and we and we are incredibly happy with the deal. We think it’s great for our shareholders, it’s great for consumers. We think it’s a great way to create and protect jobs in the entertainment industry. We’re super confident we’re going to get it across the line and finish.”

‘Stakeholder Conerns’

In their pitch to investors, Paramount outlined some key “stakeholder concerns.” Here were some cherry-picked quotes:

Bank of America: “If Netflix acquires Warner Bros., the streaming wars are effectively over. Netflix would become the undisputed global powerhouse of Hollywood beyond even its currently lofty position” – Bank of America

Director James Cameron: “Netflix would be a disaster … (Netflix co-CEO Ted) Sarandos has gone on record saying theatrical films are dead … I think that’s fundamentally rotten at the core.”

Writers Guild of America: “The world’s largest streaming company swallowing one of its biggest competitors is what antitrust laws were designed to prevent…This merger must be blocked”

Senator Mike Lee (R): “Increasing Netflix’s dominance this way would mean the end of the Golden Age of streaming for content creators and consumers…[this deal] should send alarm to antitrust enforcers around the world”

Congresswoman Pramila Jayapal (D): “This deal is a nightmare. It would mean more price hikes, ads, & cookie cutter content, less creative control for artists, and lower pay for workers.”

But here’s the thing: If Paramount gobbles up WBD, most of those concerns remain. We’d have one bloated entertainment company controlling too much of an industry. Paramount claims its acquisition would be “pro competition,” which makes no sense when the deal would eliminate one of the biggest competitors in the space.

Digging Deeper

While Paramount went public with their argument, they weren’t entirely eager to outline all the particulars. If you dig into their legal filing, you can see there’s some interesting money sloshing around this deal. While the Ellison family is putting up $12 billion, a staggering $24 billion comes from Middle East sovereign wealth funds.

Our other outside financing partners (the Public Investment Fund (Kingdom of Saudi Arabia), L’imad Holding Company PJSC (Abu Dhabi), Qatar Investment Authority (Qatar) and Affinity Partners (Jared Kushner)) have agreed to forgo any governance rights – including board representation – associated with their non-voting equity investments. Accordingly, the Transaction will not be within CFIUS’s jurisdiction.

When asked point-blank about why these investors would pony up multiple billions without any ability to govern a merged company, Paramount leaders basically sidestepped the question as Ellison hand-waved the investment as just a darn good deal for everyone.

“When you look at that from a returns perspective, it’s incredibly attractive to — obviously, to all shareholders,” Ellison said. “And from that standpoint, I think that’s why our partners obviously are here, is when you look at the returns, this is a good thing for our business. It’s obviously why we’re advocating for it so strongly here today. And that’s – I think that’s the lens that they’re incredibly sophisticated investors. They’ll look at it through the lens all investors do, which is how do they maximize value. And one of the things that we always look at as the largest investor in this business is we are shoulder to shoulder with shareholders looking to maximize value for everybody involved in our company.”

That’s one way to look at it. Another way to look at it is that foreign investors and the President’s son-in-law might really love to control a staggering chunk of the media America consumes.

From Paramount’s own poorly-Photoshopped materials today, this would be the TV landscape David Ellison, Jared Kushner, and the Saudis would like to control.

To be clear, Paramount would still have the ability to acquire all of these networks if they just buy out Discovery Global after the spinoff. Today, Ellison said they value the network portfolio at $1 per share.

Ellison Makes His Case on CNBC