Paramount is doing everything except the one thing that could give its Warner Bros. bid a chance of success
Warner Bros. says “more than 93%” of its shareholders have rejected Paramount. That’s probably not going to change substantially unless Paramount boosts its offer.
Paramount Skydance just said it would extend the deadline for Warner Bros. Discovery shareholders to tender their stock to its hostile bid, a move that does nothing except underscore that Paramount is trying everything except the one thing that might actually work: raising its offer.
Thursday’s announcement — that Paramount is now giving shareholders until February 20 to consider tendering their shares to the hostile takeover effort — is the latest blustery nothingburger in a series of them for David Ellison-run Paramount. The thing that would persuade shareholders to support a Paramount bid is the same thing that persuades shareholders to do anything: more money. And so far, Paramount hasn’t been willing to pony up any more cash.
Instead, it first offered a Larry Ellison backstop for its $30-per-share offer. That doesn’t change the amount of money a shareholder would get out of the deal. Then it reiterated its offer, which, last I checked, also doesn’t mean any more money for shareholders.
Then Paramount said it would launch a proxy fight in order to replace Warner Bros.’ board members with people who are more favorable to Paramount’s bid. Just one problem: winning a proxy fight requires shareholder support — which is the same thing that winning a hostile takeover bid requires. If you don’t have enough direct support for your offer from shareholders, you’re not going to get them to support your pursuit of new directors who like your offer, either.
Now, Paramount is extending the duration of its offer into next month, which is a pretty clear indicator that so far, it hasn’t gotten the support it needs from the shareholder base.
Warner Bros. on Thursday seemed to confirm as much, telling Variety in a statement that “more than 93%” of its shareholders had rejected “Paramount’s inferior scheme.”
Meanwhile, Netflix, which I’ve said will likely prevail in its pursuit, has been outmaneuvering Paramount. With Netflix’s stock falling in value, the company flipped its offer to all cash in order to shore up support from Warner Bros. shareholders. Now there’s no stock price multiplication involved: Netflix is offering to pay $27.75 of cash for most of Warner Bros., with a spinout reportedly likely to generate several additional dollars of per-share value. Meanwhile, Paramount is offering $30 per share in cash for the whole company.
Perhaps it’s a stall tactic as Paramount waits on someone to lodge a regulatory challenge. Fear of a deal not going through, or taking a long time to go through, might persuade shareholders to look at a competing offer, and David Ellison has been taking his fight to Europe, likely in hopes regulators there will oppose the deal. Perhaps he’s just hopeful that he can do some really exceptional convincing — Deadline reports that Ellison and his team have been meeting with Warner Bros. investors in recent weeks to lobby support.
But the bottom line, especially considering that the papers have been signed on the Netflix-Warner Bros. deal and breakup fees would be in order if it doesn’t go through, is that money talks. If Paramount wants to snatch victory from the jaws of defeat, what it’s done so far — which has been rejected by the Warner Bros. board twice and, if their statement is to be believed, is in the process of being rejected by Warner Bros. shareholders — isn’t going to work, no matter how loudly it crows.
Instead, to succeed Paramount simply has to do the one thing it so far has been unwilling to do, and pay more.
