Shares of Paramount Skydance (PSKY) rose 1.7% in after-hours trading yesterday after the company reaffirmed its $30 per share offer to buy Warner Bros. Discovery (WBD) as “superior” to Netflix’s (NFLX) $27.75 per share bid. Some of WBD’s major shareholders remain split on the best choice. Paramount Skydance argues its offer to acquire the entire company outperforms Netflix’s, as the value of WBD’s planned cable spinoff, central to Netflix’s proposal, is effectively worthless.
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Comcast (CMCSA) recently spun off and listed Versant Media (VSNT), including its digital assets and TV channels like CNBC. The spinoff received a lukewarm response and has fallen nearly 18% since its debut, adding more weight to Paramount Skydance’s argument.
Paramount Skydance Vows to Fight On
On January 8, WBD board unanimously rejected Paramount Skydance’s revised hostile offer, backed by $40 billion in personal equity financing from Oracle (ORCL) CEO Larry Ellison and $54 billion in debt. However, WBD called the bid “inadequate,” citing doubts about Paramount Skydance’s ability to close the deal and the high risks and costs for shareholders if it fails. The board highlighted the offer’s heavy reliance on debt, which raises the chance of deal failure. Paramount Skydance’s tender offer expires on January 21, but can be extended.
In contrast, the WBD board noted that Netflix’s offer requires no equity financing and is supported by $59 billion in bank debt from lenders including Wells Fargo (WFC), BNP Paribas, and HSBC Holdings (HSBC). Moreover, WBD would owe Netflix a $2.8 billion termination fee if it backs out, part of $4.7 billion in total costs to end the deal. As of January 8, Paramount has not agreed to cover those costs.
Hope remains for Paramount Skydance. WBD Chairman Samuel Di Piazza stated the company is not negotiating with Paramount right now but would consider a stronger offer. Additionally, some large WBD investors, like the 7th-largest shareholder Pentwater Capital, think the board is wrong for not talking to Paramount.
Both Paramount Skydance and Netflix are set to face heavy antitrust review from U.S. and European regulators, and winning shareholder votes is just the first step. Paramount Skydance’s deal would create a studio larger than Walt Disney (DIS) and combine two major TV networks. Some Democratic senators say it would control almost everything Americans watch on TV. Bipartisan lawmakers are also worried that either deal would harm consumers and creatives. Meanwhile, President Donald Trump has said he plans to weigh in on the deals.
Is PSKY Stock a Buy?
On TipRanks, Paramount Skydance has a Moderate Sell consensus rating based on one Buy, eight Holds, and seven Sell ratings. The average Paramount Skydance price target of $14.08 implies 14.8% upside potential from current levels. Over the past year, PSKY stock has gained 15.3%.
