Paramount Fires Off Letter To Warner Bros. Investors Claiming Netflix Deal Overstates Value And Can’t Match Its Cash Bid

• Paramount told WBD investors Netflix’s offer delivers less real value once adjusted for stock declines, deal mechanics and Global Networks valuation.
• It estimated the Netflix package at about $28.75 per share before additional risks.
• The letter urged shareholders to view Paramount’s all-cash bid as the more certain option.

Paramount Skydance Corporation (PSKY) intensified its appeal to Warner Bros. Discovery (WBD) shareholders on Wednesday, arguing that its $30 per share all-cash offer provides materially higher and more reliable value than WBD’s agreed transaction with Netflix (NFLX). 

The company said Netflix’s mix of cash, stock and a stake in the Global Networks spin-off is overstated in value once adjusted for Netflix’s falling share price, potential purchase price reductions tied to debt allocation, and what Paramount sees as a low underlying valuation for Global Networks.

Paramount argued that, by its estimates, the Netflix package is worth about $28.75 per share before factoring in risk or the longer closing timeline.

Financing Backed By Ellison Trust And Major Banks

Paramount said that its offer is not subject to financing conditions, supported by $41 billion in equity underwritten by the Ellison family trust and $54 billion in committed debt from Bank of America, Citi and Apollo. 

The company said the Ellison trust, which holds roughly $250 billion in assets including more than 1.1 billion Oracle shares, has a long record of funding large public-company transactions and provided WBD with a complete equity backstop. Paramount dismissed any speculation about its financing, calling doubts over its ability to fund the offer “absurd.”

Regulatory Path Framed As Faster Than Netflix’s

The company said it has already filed for U.S. antitrust clearance and begun engagement with European regulators. Paramount argued that Netflix faces a significantly tougher regulatory path because of its dominant streaming position and the competitive implications of absorbing HBO Max’s content and studio assets. 

Paramount pointed to the combined entity’s estimated 43% global streaming share and Netflix’s over 50% share of European OTT subscription revenue as factors that could prolong or jeopardize the Netflix deal.

Paramount Criticizes WBD’s Sale Process

Paramount questioned WBD’s handling of the sale process, saying its advisors never marked up transaction documents or held real-time negotiations and did not seek a revised bid after Paramount submitted a fully documented $26.50 per share proposal on Dec. 1. 

The company said its final $30 per share offer, submitted the morning of Dec. 4, received no response from WBD before the board advanced toward an agreement with Netflix.

How Did Stocktwits Users React?

On Stocktwits, retail sentiment for PSKY, WBD and NFLX was ‘extremely bullish’ amid ‘extremely high’ message volume.

So far this year, PSKY is up 42%, WBD is up 180% and NFLX is up 4%.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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