The latest acquisition offer from Paramount Skydance Corp (PSKY.US) has failed to impress Harris Oakmark, a prominent shareholder of Warner Bros. Discovery (WBD.US). Last Friday, the firm—Warner Bros.’ fifth-largest shareholder with 96 million shares (about 4% of total equity as of September)—demanded better terms from the Ellison family-controlled Paramount.
Alex Fitch, Harris Oakmark’s portfolio manager and head of U.S. research, stated bluntly in an email: “The adjustments in Paramount’s new offer are necessary but far from sufficient. In our view, both bids (from Paramount and Netflix (NFLX.US)) have pros and cons, and switching partners mid-process carries costs. But if Paramount truly wants to win this battle, it must present a more compelling proposal.”
Paramount revised its $108.4 billion hostile takeover bid for the legendary Hollywood studio on Monday, strengthening its financing terms. Oracle (ORCL.US) co-founder Larry Ellison has now provided $40.4 billion in personal guarantees to secure Warner Bros., which owns the HBO Max streaming platform and blockbuster franchises like *Harry Potter*, *The Lord of the Rings*, and *Superman*.
Previously, skepticism arose among some Warner Bros. shareholders as much of Paramount’s funding relied on a revocable trust, causing hesitation. In the revised offer, Paramount raised the breakup fee for regulatory rejection from $5 billion to $5.8 billion, matching Netflix’s terms, but kept its $30-per-share bid unchanged.
**Premium Media Assets in Play** Warner Bros. has extended the deadline for shareholders to accept or reject the offer from January 8 to January 21. Last Wednesday, Warner Bros.’ board unanimously recommended rejecting Paramount’s prior bid in favor of Netflix’s proposal, citing Paramount’s financing as lacking “full certainty.”
Though Netflix’s cash offer of $23.25 per share is lower than Paramount’s, the board deemed it superior due to more reliable funding, an additional $4.50 per share in Netflix stock, and potential gains from Warner Bros.’ spin-off of Discovery Global.
Yussef Gheriani, CIO of IHT Wealth Management—which holds 16,000 Warner Bros. shares, 6,500 Netflix shares, and 60,000 Paramount shares—noted the bidding war underscores the market’s high valuation of Warner Bros.’ premium assets. “Opportunities to add top-tier media assets to a portfolio are rare,” he said, adding he may follow the board’s guidance, as they “understand the business nuances better than we do.”
Investor Thomas Poehling, who holds 484,000 Warner Bros. shares and 639,000 Paramount shares, indicated he might accept Paramount’s revised offer if Netflix doesn’t raise its bid, citing higher regulatory approval odds. Ellison’s guarantee, he said, “adds significant stability, drastically reducing financial uncertainty.”
Gheriani and Poehling aren’t alone in holding stakes in both rival studios. Vanguard, State Street, and BlackRock—Warner Bros.’ top three shareholders, collectively controlling at least 22%—are also among the top ten investors in Paramount and Netflix. None of the firms commented.
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